Is the United (UAL) funding arrangement a good deal?

FYI link above goes to a Marriott article. I got you covered - great insight below:

United Airlines Ratings: BB-/Ba1/BB (S&P/Moody’s/Fitch)

United Airlines adds additional liquidity via innovative $5B financing against air miles program United Airlines continues to line up fresh liquidity, disclosing this week it has received a commitment for a $5 billion seven-year term loan B against its MileagePlus rewards program. Goldman Sachs, Barclays and Morgan Stanley will be leading the deal, which could hit the market prior to the July 4 break. Although committed as a loan, the deal is expected to be split between loans and bonds, and a SEC filing this week offered a broad outline of the highly structured transaction. MileagePlus generated $1.8 billion of EBITDA ― roughly 26% of United’s adjusted EBITDAR ― on 2019 sales of roughly $5.3 billion, via the sale of miles to United and its third-party partners. Roughly 71% of those sales are to third-party partners, and a significant portion of those sales are tied to non-airline related activity; as such, the deal is a play on consumer spending as much as a bet on the return of air travel. Of its 51 non-air partnerships, 15 are retail related, with six each in the lifestyle and at-home segments, and 14 in the hotel space. The deal has been fashioned to assure timely repayment. Although it will be interest only in years one and two, full equal quarterly amortization kicks in starting in year three, sources noted. The transaction also will include a three-month debt service reserve. The loan will sit at a bankruptcy remote vehicle, Mileage Plus Intellectual Property Assets Ltd., secured by critical IP and cash collections. Notably, the waterfall is structured so that debt service is paid prior to releasing funds to MileagePlus for its operating expenses and redemption costs. In addition, there’s a 50% excess cash flow sweep ― also in line ahead of releasing operating funds ― and a quarterly debt service coverage test based on peak quarterly debt service that would provide additional lender protection in a prolonged downturn by triggering early amortization. The issuer also would be required to have $2 billion of minimum liquidity. During the depths of the 2008-2009 Great Recession, MileagePlus revenues fell by only 2%, versus 18% for United overall, although the situation with United is far more serious now, with a $40 million daily cash burn in the second quarter and cost savings initiatives expected to trim daily cash burn to $30 million in the third quarter, sources pointed out. For July, United expects consolidated capacity to be down approximately 75%, and domestic capacity to be down approximately 70% from 2019. However, July passenger revenue to be up between 50% and 100% versus the airline’s June passenger revenue estimate. And although miles earned on United were down by 97% in April and May, third parties have insulated the program somewhat. April-May cash collections declined roughly 50% from the year-earlier period, to $455 million, though the decline in mileage redemptions resulted in $590 million of net cash flow for the period. MileagePlus is projecting LTM March 31 lease adjusted leverage at 5.2x, and 2.6x net. Total adjusted debt to adjusted EBITDAR is 5.6x. While pricing specifics weren’t available in this week’s SEC filing, the loan would have a 1% floor. The loan would also feature on a non-call period with additional call premiums to follow. And given the tight structure, accounts also expect the MileagePlus deal to garner strong ratings. Moreover, the transaction also includes United as a guarantor for added suport, sources said. Numerous moves United has aggressively lined up incremental liquidity in recent months, notwithstanding a shelved $2.25 billion high-yield execution that was planned to repay a $2 billion bridge loan from a J.P. Morgan-led syndicate backed by used aircraft. Pricing on the one-year bridge starts at L+200 and steps up over time to L+250. A $500 million Goldman Sachs-led bridge is backed by spare parts and steps up quarterly from L+275 to L+350, while BofA Securities is agent on a $250 million bridge secured by spare aircraft engines, stepping from L+300 to L+350 over the year. United’s $2 billion revolver is currently untapped, while the U.S. Treasury has furnished $5 billion of CARES Act financing. A potential additional CARES Act loan could provide another $4.5 billion. The airline is expected to enter the third quarter with roughly $17 billion of liquidity. United Airlines is rated Ba1/BB-/BB. Moody’s and Fitch have a negative outlook, while S&P has the airline on negative watch