Qantas Airways Ltd has said that it has issued A$500 million of unsecured bonds with a coupon of 5.25% to help strengthen liquidity and replace maturing debt as it deals with plunging demand due to the coronavirus pandemic.
The airline said in a statement that the 10-year issue is oversubscribed. The coupon rate is higher than its last pre-pandemic issuance of a A$425 million, 10-year bond with a coupon of 2.95% in November.
The new issue is expected to be rated by Moody's at Baa2 with a negative outlook, according to the marketing materials seen by Reuters.
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Qantas is one of the few airlines in the world to retain an investment grade rating during the pandemic. Southwest Airlines Co, also investment grade, issued $1.3 billion of seven-year bonds with a 5.125% coupon in June.
Qantas said that it will use the funds in part to pay off A$400 million of bonds with a 7.5% coupon due to mature in June 2021, its only near-term maturity.
Those were issued in June 2014, when it was struggling financially and had lost its investment grade rating ahead of a successful turnaround plan that saw it restored.
To help weather the coronavirus crisis, which has stopped it flying international services and severely cut its domestic operations, Qantas raised A$1.5 billion of equity in June. It has also raised debt secured over some of its aircraft to give it extra liquidity.
Last month, the airline told investors that it retained A$2.5 billion of unencumbered assets, including 46% of its fleet, land and spare engines.
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