Private equity steps in for airlines
Emailed on March 20th 2020 in The Friday Forward
Apollo Global Management has bought between 25% and 50% of a $2 billion, asset-backed loan made last week to United Airlines(Nasdaq: UAL), in order to help increase company liquidity.
According to Axios, this reflects how the private financial sector is "sticking fingers in the dam" until the federal reinforcements arrive, so that airlines needn't lay off or furlough tens of thousands of workers.
We'll likely see more of these deals, as private equity is still sitting on more available cash (dry powder) than at any point in history. Apollo, which has around $50 billion of dry powder spread among its different strategies, is said to have also done several similar deals in recent days, although United is its largest. The firm also has extensive airline industry experience, including both carriers and plane financing.
"The $2 billion one-year loan is among those that banks have been asked to arrange to help companies in industries from cruise lines to casinos cope with travel and business disruptions that could last for months as a result of the Covid-19 outbreak. American Airlines, JetBlue, and Southwest Airlines recently entered into similar facilities. — Davide Scigliuzzo & Paula Seligson, Bloomberg