8-K: Sun Country Airlines Secures $75 Million Revolving Credit Facility

Sun Country Airlines has entered into a new $75 million revolving credit facility to support general corporate purposes.

Summary

• Sun Country Airlines' subsidiary, Sun Country, Inc., entered into a $75 million Revolving Credit Facility on March 24, 2025.
• The Revolver is with UMB Bank, National Association, as administrative agent, MUFG Bank, Ltd. and Sumitomo Mitsui Banking Corporation, as lenders.
• This new facility represents a $50 million (200%) increase from the company's previous revolver.
• The proceeds from the Revolver will be used for general corporate purposes.
• Borrowings under the Revolver will bear interest at SOFR plus a margin of 2.50%.
• The Revolver is guaranteed by Sun Country Airlines Holdings, Inc. and is secured by a pool of collateral.
• The collateral may include airframes, engines, spare parts, flight simulators, ground support equipment, receivables, cash, and cash equivalents.
• The Revolver includes customary representations, warranties, negative covenants, conditions, and defaults, including cross-defaults.
• The company must maintain at least $55.0 million in unrestricted cash and cash equivalents, certain capital markets proceeds and unused commitments.
• The company must maintain a minimum adjusted EBITDAR of $110.0 million for any four consecutive fiscal quarters.
• The company must maintain a minimum ratio of the borrowing base of the Collateral to outstanding obligations under the Revolver of not less than 1.0 to 1.0.
• An event of default could result in all loans becoming immediately due and payable and the Revolver being terminated.

Sentiment

Score: 7

Explanation: The announcement is neutral to positive. Securing a larger credit facility provides financial flexibility, but also introduces debt and covenants.

Positives

• Sun Country Airlines has increased its financial flexibility with a larger revolving credit facility.
• The $75 million Revolver provides additional capital for general corporate purposes.
• The company has secured the financing at SOFR plus a margin of 2.50%.

Negatives

• The Revolver is secured by a pool of collateral, potentially limiting the company's flexibility with those assets.
• The Revolver includes covenants that require the Company to maintain (i) unrestricted cash and cash equivalents, certain capital markets proceeds and unused commitments of not less than $55.0 million, (ii) a minimum adjusted EBITDAR of $110.0 million for any four consecutive fiscal quarters and (iii) a minimum ratio of the borrowing base of the Collateral to outstanding obligations under the Revolver of not less than 1.0 to 1.0.
• Failure to comply with the covenants could trigger an event of default, potentially leading to the acceleration of debt.

Risks

• An event of default under the Revolver could result in all loans and other obligations becoming immediately due and payable and the Revolver being terminated.
• The company's ability to meet the financial covenants, including maintaining minimum cash levels and EBITDAR, could be affected by various factors, including economic conditions and airline industry dynamics.

Future Outlook

The proceeds from the Revolver will be used for the Borrower's general corporate purposes.

Industry Context

Airlines often use revolving credit facilities to manage cash flow and fund operations, especially given the cyclical nature of the industry and potential for unexpected events.

Comparison to Industry Standards

• Comparable airlines often utilize revolving credit facilities to manage liquidity and fund operations.
• The size and terms of the facility are likely benchmarked against similar airlines with comparable revenue and credit profiles.
• For example, Southwest Airlines has a large revolving credit facility to provide financial flexibility.
• The interest rate of SOFR plus 2.50% is within the typical range for airline credit facilities, depending on the company's credit rating and the overall market conditions.

Stakeholder Impact

• Shareholders may view the increased financial flexibility positively, but will also be mindful of the increased debt and associated covenants.
• Employees may benefit from the company's enhanced ability to invest in operations and growth.
• Customers should not be directly impacted, but a financially stable airline is better positioned to provide reliable service.
• Suppliers and creditors may view the increased financial stability as a positive sign.

Next Steps

• The Revolver agreement will be filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ending March 31, 2025.

Key Dates

Keywords

Revolving Credit Facility, Sun Country Airlines, Financing, Debt, EBITDAR, SOFR, Collateral, Airlines