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Ever wanted to invest in an airline? Delta announced Wednesday they’re looking for $3 billion in loans and bonds to help increase their liquidity.
Bloomberg (via Yahoo!) reports the carrier is offering five-year bonds at a return of “about 7%.”
That’s a pretty decent return. But you’d have to invest a pretty penny to really make it worth your while.
Is this something you’re considering?
I say this half in jest — but also because people will ask us: no, we haven’t heard if bondholders will receive any fun perks other than — hopefully — their profit. No mention of upgrade certificates or lifetime Diamond status or…
(For the record: Neither René nor I own or trade any airline stocks or bonds.)
There’s always the risk Delta could go bankrupt. But your chances of recouping at least some of your investment are better than if you hold stock.
Plus, as Investing in Bonds explains, “In a corporate bankruptcy or liquidation, although secured creditors, bondholders and holders of other senior debt issues may receive some distribution of corporate assets, it is rarely enough to ‘make whole’ their total investment. (Bold mine). So, hey, you never know what fun assets you might receive. (“Sure, I’ll take an A321!” 😉 )
But the risk may not be worth it. Maybe you’re better off just being a SkyMiles holder.
What do you think?
— Chris
Featured image: ©iStock.com/Boarding1Now
Advertiser Disclosure: Eye of the Flyer, a division of Chatterbox Entertainment, Inc., is part of an affiliate sales network and may earn compensation when a customer clicks on a link, when an application is approved, or when an account is opened. This relationship may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed, or approved by any of these entities. Reader comments reflect the views of the individuals who wrote them, are not reviewed or endorsed by Eye of the Flyer or by any advertiser, and should not be treated as advice. Some links on this page are affiliate or referral links. We may receive a commission or referral bonus for purchases or successful applications made during shopping sessions or signups initiated from clicking those links.
Carnival Cruise sold a few billion dollars in corporate bonds and I believe the sale lasted last than an hour. If Delta floats a corporate bound, every hedge fund in America will snatch up this bond offerings and then resell it on the secondary bond market in a matter of hours, so yes I would be interested, but this corporate debt is going to be gone before the average investor can ever log onto their computer
I think Delta stock is a better investment in terms of potential return, although more risky. I’m not an advisor and this is just my opinion so please don’t actually do this just because of me and you should only do it if you can afford to lose it.
How about 007% for James Bond’s?
I would buy bonds in an airline before stock as many will go into Chap 11 BK and shareholders will be wiped out and new stock will be issued bondholders would get paid first and would only lose if the airline was totally dissolved. Distressed Debt is where the money will be made in the coming years, especially off companies that prior to COVID-19 had a good business model, good product, good management but are in trouble due to no fault of their own, just my .02!