United Airlines’ $1 Billion Junk Muni Deal Offers a Bond Bargain

Bloomberg11-20 02:30

(Bloomberg) -- The municipal-bond market’s lagging run is opening up an opportunity for corporate-debt investors eager to secure extra yield. Junk state and local government bonds have underperformed...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUnited Airlines’ $1 Billion Junk Muni Deal Offers a Bond Bargain\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-20 02:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/united-airlines-1-billion-junk-183048353.html><strong>Bloomberg</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>(Bloomberg) -- The municipal-bond market’s lagging run is opening up an opportunity for corporate-debt investors eager to secure extra yield. \nJunk state and local government bonds have underperformed...</p>\n\n<a href=\"https://finance.yahoo.com/news/united-airlines-1-billion-junk-183048353.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"UAL","symbol_name":"联合大陆航空","start_time":0,"source_url":"https://finance.yahoo.com/news/united-airlines-1-billion-junk-183048353.html","article_id":"2484495972","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/WNbG3cVUgmIcfgvBH8fLcQ--~B/aD03NzY7dz0xMjk2O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/bloomberg_markets_842/6382a1ac56f3a70551ce5b89b2075ef7"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484495972","pubTimestamp":1732041048,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":" -- The municipal-bond market’s lagging run is opening up an opportunity for corporate-debt investors eager to secure extra yield.Junk state and local government bonds have underperformed high-yield corporate debt during the selloff that raced through fixed-income markets over the past several months, pushing their yields up by more.That’s created a gap between debt that United Airlines has sold in the corporate and municipal markets: its muni securities, which are tied to payments it makes on airport leases, are yielding half a percentage point more than the airline’s other taxable obligations, according to an analysis by Bloomberg Intelligence.That trade is poised to be further illustrated by a $1 billion muni deal that United is slated to price on Tuesday to finance costs related to a terminal renovation at George Bush Intercontinental Airport in Houston.Terminal B at Houston’s Bush airport is in the third phase of renovations which include the construction of the north concourse to","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"UAL":"联合大陆航空","UBCP":"联合合众银行","BK4211":"区域性银行"},"translate_title":"联合航空10亿美元的垃圾市政交易提供了债券交易","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"UAL":1,"UBCP":1,"US10Y.BOND":1,"US12M.BOND":1,"US2Y.BOND":1,"US30Y.BOND":1,"US3Y.BOND":1,"US5Y.BOND":1,"US6M.BOND":1,"US7Y.BOND":1},"content_text":"(Bloomberg) -- The municipal-bond market’s lagging run is opening up an opportunity for corporate-debt investors eager to secure extra yield. \nJunk state and local government bonds have underperformed high-yield corporate debt during the selloff that raced through fixed-income markets over the past several months, pushing their yields up by more.\nThat’s created a gap between debt that United Airlines has sold in the corporate and municipal markets: its muni securities, which are tied to payments it makes on airport leases, are yielding half a percentage point more than the airline’s other taxable obligations, according to an analysis by Bloomberg Intelligence. \nThat trade is poised to be further illustrated by a $1 billion muni deal that United is slated to price on Tuesday to finance costs related to a terminal renovation at George Bush Intercontinental Airport in Houston. \nWhile the bonds are issued by Houston, they’re secured by payments made by United and an unconditional guaranty from the airline, according to offering documents. That means when investors consider whether to buy the debt, they are evaluating the credit quality of United rather than the city or its airport. \n“If an investor is buying United corporate debt, you should absolutely be looking at this deal,” said Eric Kazatsky, senior US municipals strategist at Bloomberg Intelligence. “It’s the exact same credit just with more yield just sitting on the sidelines.” \nCorporations — such as airlines — can access the $4 trillion municipal bond market for certain projects that serve the public. George Bush Intercontinental Airport, known as IAH, is a United hub and transported more than 46 million people last year. The deal allows United to sell debt at tax-exempt rates, which are generally lower than corporate bond yields. \n“In this particular transaction the primary risk is whether or not you’re comfortable taking senior unsecured risks to United Airlines,” said Sean McCarthy, principal and head of municipal bond research at PGIM. “If you’re an investor, your primary decision point is going to be your comfort level around United Airlines.”\nThe bonds are rated Ba3 by Moody’s Ratings and BB- by Fitch Ratings, both below investment grade. \nUnited had its outlook revised to positive by Fitch earlier this month, indicating its credit rating could be lifted. That reflects the firm’s expectation for “continued credit metric improvement and solid financial performance relative to peers,” according to a Nov. 4 release. \n“The company is paying down debt while maintaining substantial liquidity and financial flexibility,” according to the Fitch analysts. Though, the company’s considerable multi-year capital spending program remains a credit concern. \nTerminal B at Houston’s Bush airport is in the third phase of renovations which include the construction of the north concourse to accommodate 22 gates, replacement of the baggage handling system, and upgrades to the south concourse to support larger jets, according to bond documents. All of the new infrastructure will be used by United, which accounts for more than 70% of airport passengers. \nThe project is anticipated to cost about $2.55 billion, financed by the debt sale and future United funding. Houston has agreed to reimburse United as much as $624 million for projects related to the development. Construction began in 2023 and is expected to be completed in 2028.\nBecause of the lease agreement between Houston and United, the airline is obligated to make debt-service payments on the bonds, according to a statement from Matt Smith, a spokesperson for the city’s controller’s office.  \n“United is a name that will always have a bid because it’s easily recognizable and incredibly liquid,” said Kazatsky. “Cross-over investors — or buyers interested in both taxable and tax-exempt debt — may be interested in this sale, as well as international shops.” \n--With assistance from William Selway.\n©2024 Bloomberg L.P.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484495972"}