Wheels Up Finalizes $500 Million Investment Rescue Package
Wheels Up Experience, a membership-based private flight provider, has finalized new investment into the company led by Delta Air Lines, averting potential bankruptcy and ceding control of the company.
Under the deal, Wheels Up will issue Class A common stock to the lenders, which will eventually own 95% of the company’s outstanding equity.
“The $500 million credit facility is expected to provide financial stability and serve as a strategic platform for future profitable growth,” Wheels Up officials say. Funds were contributed by Atlanta-based Delta Air Lines and CK Wheels, which is co-managed by affiliates of Certares Management and Knighthead Capital Management, along with Cox Enterprise.
Bankruptcy rumors have persisted over the past few months as financial losses grew. In early August, the publicly traded company said it had “substantial doubts” about its ability to continue business. Wheels Up has taken a number of restructuring measures, including job cuts and management changes, as jet traffic—which boomed during the pandemic—abated. In August, Delta provided Wheels Up with $15 million in short-term financing to stay afloat. Previously, Delta held 20% of Wheels Up—its largest individual shareholder.
"This investment represents both an important source of capital for Wheels Up to support our strategy for financial stability, future profitability and long-term growth on behalf of our members and customers, as well as a vote of confidence in our path forward from a group of investors with deep experience in the premium travel space," Wheels Up CEO George Mattson says. Mattson, a Delta board member, was appointed to the chief executive position in mid-September.
Working with Delta and the other investors will deepen its commercial partnership, allowing the company to provide a “seamless connection” between private and premium commercial travel, Mattson says.
The new investment structure combines Delta’s experience as an airline, Cerares’ focus on travel and tourism, and the turnaround and restructuring experience of Knighthead, Wheels Up says.
Under the agreement, Wheels Up has restructured its board of directors. Delta Air Lines will appoint four directors, Certares and Knighthead will appoint two each and Cox will appoint one. In addition, one Wheels Up executive will join the board and two independent directors now on the board will remain, the company says.
The credit facility includes a $350 million term loan funded by Delta, CK Wheels and Cox and a $100 million revolving credit facility from Delta. After closing, the terms of the agreement will allow a new lender to provide a $50 million term loan under approval by Delta, Certares, Knighthead and Cox.
The lenders will receive newly issued Wheels Up common stock of 80% of the company’s outstanding equity. After approval by stockholders of an amendment to its certificate of incorporation, Wheels Up will issue lenders additional new shares. The lenders will then own 95% of the company’s outstanding equity after closing, the company says.