Wheels Up getting $500m debt from Delta, Certares and Knighthead in return for 95% of company
Delta Air Lines, Certares Management and Knighthead Capital Management have agreed to lend $500m in debt in return for 95% of Wheels Up.
Certares and Knighthead are providing $400m with Delta using its previously announced $100m revolving credit facility. The private equity investors took Hertz Global Holdings out of bankruptcy in 2021.
Under the non-binding agreement, Delta will provide Wheels Up with $150m in new money term loans and a $100m revolving credit facility noted above. An additional $150m term loan will be provided by CK Opportunities under that facility. As will a further $50m in term loans from other investors. The additional $50m will be allocated as and when approved by Delta, Certares and Knighthead.
Wheels Up was advised by Jefferies and Kirkland & Ellis.
The company released financial results earlier today.
Wheels Up had an enterprise valuation of $2.1bn when it announced its merger with the Aspirational Consumer Lifestyle II SPAC in February 2021. It listed with a $10 share price in July 2021. Its shares closed at $1.33 yesterday.
Today Wheels Up announced that its second quarter revenue fell by $90m to $335m. The company’s net loss increased by $161m but $70m of this was a non-cash impairment. Wheels Up made a loss of $40m in the quarter.
“We are continuing to engage with strategic and financial partners around the path forward and look forward to sharing more information in the days ahead,” said Todd Smith, chief financial officer and interim CEO. “Meanwhile, we are continuing to provide exceptional service and experiences to our customers, who are reaping the benefits of our continued focus on operations.”
It had $151m of cash at cash equivalents on June 30th.
“The actions we have taken to improve our operations are translating to a better experience for our customers and an improved financial performance for the company,” said Smith. “Our on-time performance and reliability are showing marked improvement while our Adjusted Contribution margin and Adjusted EBITDA are at the best levels in almost two years, reflecting our focus on our network strengths as well as significant cost reductions and process improvements. We still have more work to do, but I am extremely encouraged by this quarter’s performance.”
Ed Bastian, Delta CEO said: “The partnership will create new opportunities for Wheels Up to drive strategic, operational and financial improvements for its customers in the months and years ahead. Delta’s unmatched expertise in premium travel, customer loyalty, corporate sales, operational reliability and aircraft maintenance, combined with Certares’ and Knighthead’s experience and global reach, are expected to speed Wheels Up on its path to profitability.
“I would like to extend my sincere gratitude to Kenny Dichter,” Bastian added. “For building the Wheels Up brand into a powerhouse in private aviation. We have great appreciation for his steadfast devotion to the members, customers and employees and his role in elevating the private aviation experience which will undoubtedly guide the industry’s path forward. We’re grateful he will continue as Wheels Up’s strategic advisor.”
Greg O’Hara, founder and senior MD, Certares, said the partnership with Wheels Up is a “natural extension” of its focus and experience in travel and tourism. “This transaction extends upon our longtime partnership with Delta across many of our portfolio companies. We’re looking forward to joining Delta, Knighthead and others in driving the company’s ongoing transformation as it elevates private aviation as an industry leader,” said O’Hara.
Wheels Up also revealed today that Delta chief financial officer Dan Janki will join the board as chairman.