UA uses Mileage Plus for collateral for $5B Loan
Jun 23, 2020, 8:31 am
#31
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Creative but not the first of its kind. It's pretty similar to what J Crew did a few years ago. Create an SPV offshore to hold assets (in J Crews case, it was their name/brands... in UAL's case it's the MP program). License the property back to the company. The UAL pitch deck even uses the same "IPCo" term. I think Goldman is/was the lead on both deals as well.
https://ir.united.com/node/23821/html
Last edited by EWR764; Jun 23, 2020 at 8:48 am Reason: Edit to revise detail of transaction
Jun 23, 2020, 9:38 am
#32
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And the other shoe drops... the IP sub (among other subsidiaries of MileagePlus Holdings) are leveraged to raise $3B of last week's $5B loan. These funds will, in turn, be lent by the subsidiaries directly to United.
https://ir.united.com/node/23821/html
https://ir.united.com/node/23821/html
Jun 23, 2020, 10:14 am
#33
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Can someone who understands accounting explain what the $6.4B in deferred revenue on the MPH slide means (pg 35)? Are these miles that MPH is sitting on that are waiting to be redeemed for air travel? If so, that implies there are roughly 470 billion miles in circulation, correct? I'm assuming MPH revenue is ~$0.014 cents per mile ($0.0125 from UA and $0.015 from Chase)
Jun 23, 2020, 10:44 am
#34
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I wonder what the median non-zero balance is.
Jun 23, 2020, 2:17 pm
#35
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Jun 24, 2020, 12:29 am
#38
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David
Jun 24, 2020, 12:40 am
#39
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Please follow that discussion in https://www.flyertalk.com/forum/unit...solidated.html
The short answer that is a very unlikely outcome considering their level of cash.
The short answer that is a very unlikely outcome considering their level of cash.
Jun 24, 2020, 8:12 am
#40
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Barring an even greater catastrophe than we are in, virtually no chance before year-end, and probably not in the next year or two, either. United has borrowed enough cash to *survive* a near-zero demand environment for the time being.
However, if demand only recovers to, say, 50-60% of pre-COVID, with a poor corporate/leisure ratio, and virtually nonexistent international, then United will have to fundamentally restructure its business because it will have a staggering debt load and its primary revenue drivers (which it needs functional to rebuild its balance sheet) will be substantially impaired. Right now, the outlook is more optimistic, but of course that can change.
However, if demand only recovers to, say, 50-60% of pre-COVID, with a poor corporate/leisure ratio, and virtually nonexistent international, then United will have to fundamentally restructure its business because it will have a staggering debt load and its primary revenue drivers (which it needs functional to rebuild its balance sheet) will be substantially impaired. Right now, the outlook is more optimistic, but of course that can change.
Jun 24, 2020, 7:30 pm
#41
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In the new corporate structure Mileage Plus Holdings (MPH) only has 'input' into the MP program. Every aspect of the program related to status, service, benefits, redemption rates, is controlled by UA and not MPH. The only aspect of MP that is solely controlled by MPH is the price UA pays MPH whenever someone earns a mile by purchasing a ticket. That price currently sits at $0.0125 per mile. MPH can unilaterally force that price up under certain scenarios. That's it.
Last edited by WineCountryUA; Jun 24, 2020 at 9:12 pm Reason: split post
Jun 24, 2020, 8:05 pm
#42
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United buys 15K miles from MPH at a minimum rate of $0.01 per mile + an additional margin2
2The price at which United buys miles from MPH is subject to adjustment such that MPH’s United related EBITDA margin (defined as the quotient of (i) United related revenue, minus MPH operating expenses excluding depreciation and amortization, minus estimated future redemption cost of miles sold, divided by (ii) United related revenue) is at least 20%.
2The price at which United buys miles from MPH is subject to adjustment such that MPH’s United related EBITDA margin (defined as the quotient of (i) United related revenue, minus MPH operating expenses excluding depreciation and amortization, minus estimated future redemption cost of miles sold, divided by (ii) United related revenue) is at least 20%.
Last edited by WineCountryUA; Jun 24, 2020 at 9:16 pm Reason: Cleanup after move
Jun 24, 2020, 8:39 pm
#43
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... it should be noted this number is speculation. What UA stated was...
Jun 24, 2020, 9:22 pm
#44
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3Redemption rate fixed at $0.01 per mile. Note: All values, unless otherwise indicated, are illustrative.
Move the discussion to the MPH so we would not take the GS thread off topic.
Jun 24, 2020, 10:03 pm
#45
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Correct, they are saying all prices are illustrative unless we explicitly tell you the price. And then in footnote 3 they tell you the actual price. I believe the illustrative prices are for partners (Chase, etc) so as to not violate confidentiality.