JetBlue Airways (NASDAQ:JBLU) shares dropped more than 15% today after it launched a US$2.75 billion bond-and-loan sale, leveraging its loyalty program to raise funds for general corporate purposes.
The financing package consists of US$1.5 billion in seven-year bonds, which are callable in three years, and a US$1.25 billion five-year term loan.
In addition, the airline plans to sell at least US$400 million in convertible bonds, which are aimed at repurchasing some of its existing convertibles due in 2026.
The move comes as Moody’s Ratings downgraded JetBlue’s credit rating further into junk status, assigning a B3 rating.
Moody's expressed concerns about the airline's financial outlook, stating that the restoration of operating profit and cash flow "to levels that would lead to materially stronger credit metrics will require a number of years."
JetBlue's use of its loyalty program as collateral for the debt sale follows a trend seen among other major carriers like Delta Airlines and United Airlines, who used similar strategies during the COVID-19 pandemic to secure financing.
JetBlue Airways (NASDAQ:JBLU) Corp will utilise approximately US$11 billion in unencumbered assets, including its loyalty program, to back this new financing initiative.