Hawaiian says demand is normalizing, no more plans to raise capital

By Devika Patel

Knoxville, Tenn., April 28 – Hawaiian Holdings, Inc. reported that bookings and demand have returned to their pre-Covid-19 pandemic levels. This, along with an equity raise and a $1.2 billion debt issuance last quarter, have increased the company’s liquidity to $2.1 billion and management does not see any need to raise more cash through the markets.

“We address any lingering skepticism about our near-term liquidity by bolstering our balance sheet through our at the market equity offering and a $1.2 billion debt financing backed by our loyalty program cash flows and brand assets,” president and chief executive officer Peter Ingram said on the company’s first quarter ended March 31 earnings conference call on Tuesday.

“With $2.1 billion in liquidity, we are no longer actively looking to raise capital.

“Our Treasury team has done a remarkable job over the past year, and we are confident we have the liquidity to withstand whatever remains of this crisis,” Ingram said.

The company has strong bookings.

“As I look out to the second quarter, I'm optimistic about our continued recovery in North America,” Ingram said.

“Bookings have recovered and remain strong.

“Our booking curve is lengthening as travelers become more confident, and demand looks much more like pre-pandemic normal,” Ingram said.

The company has a high cash balance and a heavy debt load, but adjusted net debt is not far from where it was before the Covid-19 pandemic began.

“While, we have significantly increased our debt balance over the past year, our adjusted net debt is only $35 million higher than the balance as of Dec. 31, 2019,” executive vice president and chief financial officer Shannon Okinaka said on the call.

“Although our higher cash balance will incur greater carrying costs, we believe it is appropriate in the near-term.

“Having said that, we are encouraged by the improving market conditions, which are moving us closer to the return of consistently positive free cash flow,” Okinaka said.

As of March 31, the company had unrestricted cash, cash equivalents and short-term investments of $1.9 billion, up $1 billion from Dec. 31, 2020. At the same time, Hawaiian had $2.1 billion of outstanding debt and finance lease obligations, up $852 million from Dec. 31, 2020.

On Jan. 28, Hawaiian Airlines priced an upsized $1.2 billion issue of 5¾% five-year first-lien senior secured notes (Ba3//B+) at 99.449 to yield 5 7/8%.

The oversubscribed deal was upsized from $800 million.

The offering priced at the tight end of yield talk in the 6% area.

Lead bookrunner Barclays was the structuring agent. Joint bookrunners were Goldman Sachs & Co. LLC, BNP Paribas Securities Corp., Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC.

The notes become callable after three years at par plus 50% of the coupon.

The notes were issued via Hawaiian Brand Intellectual Property, Ltd. and HawaiianMiles Loyalty, Ltd.

The deal is backed by security including first priority interest in the cash revenue from the HawaiianMiles loyalty program and intellectual property related to HawaiianMiles, as well as Hawaiian’s brand intellectual property.

Bond investors are protected by an annual appraisal of collateral backing the bonds, to be conducted each April.

A special interest rate trigger provision would increase the rate on notes by 2% if the loan-to-value ratio exceeds 62.5%, and continue to pay the higher rate until the ratio does not exceed that threshold.

Proceeds were earmarked to refinance the existing Coronavirus Aid, Relief and Economic Security (CARES) Act Economic Relief Program loan and further enhance the airline's liquidity position. The additional proceeds resulting from the $400 million upsizing of the deal was earmarked for liquidity enhancement.

The airline is based in Honolulu.

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