Tedgrrrr

By my math, a $100,000 investment, would be worth $141,000 in five years... anyone else thinking of "loaning" Delta money? Seems like a good deal. We're on the fence...

https://www.bloomberg.com/news/artic...id-travel-halt

BadgerFlyer91

It would be - unless they end up restructuring at some point. They are definitely pricing in risk here.

Duke787

Ford just offered 9% on on their 5 year bond issue last week. Guess it depends who you think survives. At the moment the Fed can buy corporate junk bonds so at the moment the US government is effectively the backstop against this bond going bad.

That said, I haven't looked at all the bond offerings out there but find it hard to believe there aren't safer places to put your money even if the 5 year yield is lower to reflect the lower risk premium.

Not to mention DL is already sitting on a fairly big pile of long-term debt (not as big as AAL but not insubstantial).

rylan

Bleh, Bloomberg pay wall.

But I'd agree there are safer places to put your money with similar or better return. Or at least not risk of loosing the entire thing in event of bankruptcy.

Tedgrrrr

I have an affinity for Delta, as I'm sure most of you do too. tough call... I think it's more likely the Government would help Delta survive than most other companies, but who knows... arghhh. Plus, if I invest and Delta goes under I would have bigger things to worry about than my $$$, such as my Medallion Status

cre95

Your medallion status is safe through Jan 31, 2022 so don't worry about that. If Delta goes under, however, you may lose the benefits that come along with it when flying Delta. That doesn't seem to stop some who seek gaining the status even though they don't fly or intend to fly much

Duke787

Government may help Delta survive but that doesn't mean they won't force them through bankruptcy to get there. I believe the bondholders were wiped out in the GM bailout post-financial crisis. You basically are gambling that the government will effectively bail them out via the junk bond market (as noted above) in which case they won't be looking to wipe out the bondholders but there's no guarantee.

There are better opportunities likely out there. If your bet is that DL will survive over the next 5 years, you are likely better off making an equity investment. The stock has been beaten down so far that a modest 7% return is pretty reasonable (at today's price, 7% growth amounts to the stock going up $1.59 in real terms) and the upside is higher if business picks up by 2024.

mtofell

Yeah, I'd take Ford over Delta 8 days a week as an investment. Airlines come and go like the wind.

PV_Premier

I made some money on AS and DL stock the past few years, got out of both in Q1 sensing that things were ripe for things to go awry for airlines in 2020. Didn't think it would be this bad.

If travel starts making a legitimate comeback in late 2020 I might buy back in at low prices, but I am not interested in the bonds. I can do better than 7% over a 5 year term with well planned investments in other sectors.

BOSskier

Either way, if you go for it, buy it in a tax-advantaged account if you can otherwise the return isn't as great as it first looks (depending, of course, on your tax situation ).

toomanybooks

Warren Buffett pretty much owns stocks, cash/equivalents, and preferred stock with big dividends and warrants/options. Almost no bonds.

Be like Warren.

DesertNomad

With the inflation that's coming you would be better off is some sort of non-dollar-cash investment.

757Forever

I'm buying blue chip dividend paying preferred oil stocks, which are trading at a significant discount. I'm too fearful that restructuring/bankruptcy could result in a major haircut for bondholders. At least with preferred stock comes dividends depending upon what you buy, and some measure of bankruptcy protection if the worst happens. You also have to factor in the inflationary risk, as well.

TomMM

I've been looking at UA and DL bonds. They have good coupon rates and the longer term bonds are trading at a decent discount.

Often1

Don't invest because you have a personal affinity for a business. Invest because the deal is good.

The USG may well bail air carriers out again, but if it does, the next time, I am willing to bet that there is a pre-packaged BR to wipe out other debt, e.g. yours.

I would only make this investment if it were a small part of my portfolio and well-hedged.