Midtown Manhattan-based investment bank Jefferies Financial Group Inc. advised a major deal to cede majority equity of Wheels Up Experience Inc., a private jet lending company, to investment groups and Delta Air Lines Inc. — signaling the bank’s ascension to becoming a top adviser in the aviation space.
In the first half of 2022, Jefferies ranked No. 10 in global mergers and acquisitions advising by deal value, according to Ion Analytics, and ranked No. 16 for the first half of 2023. Since 2013, Jefferies has advised on over 55 transactions in commercial aviation.
Wheels Up will receive $500 million in new financing to expand its operations, to improve customer service and to add more travel destinations by building a new facility.
Investment managers Knighthead Capital Management LLC and Certares Management LLC, along with Delta and other affiliates, together received 95% equity in Wheels Up in exchange for the cash infusion.
“The partnership would combine the experience of Delta, the No. 1 premium airline and a longstanding Wheels Up partner, with the travel and tourism focus of Certares and turnaround and restructuring experience of Knighthead to boost Wheels Up as it evolves and elevates its customer experience, reliability and financial performance,” Wheels Up said in a statement.
Jefferies, along with Kirkland & Ellis LLP advised the transaction on financing strategy and terms. Jefferies advised on the type of funding for the transaction, Class A common stock.
Within financing deals, there are two types of financing: equity and debt.
Debt financing involves borrowing funds to raise capital and then repaying them with interest, while equity financing involves raising funds by selling equity and, subsequently, ownership in a company.
The lenders in the deal, Delta, Certares and Knighthead, will take equity in Wheels Up as it builds a new facility and expands its aviation services. This allows Delta to become a partner in Wheels Up’s operations.
Without accounting for additional factors, like other liabilities or market conditions, the deal’s presumed valuation of Wheels Up, around $526.3 million, would measure up to Jefferies’ average M&A value per deal in the first half of 2023 of about $644 million.
Wheels Up required stockholders to approve any new financing terms. To get the funds sooner, the company invoked the financial distress exception, issuing 80% of the company’s outstanding equity without getting approval from its stockholders.
The financial distress exception allowed Wheels Up to bypass the usual requirement for stockholder approval. The maneuver is typically invoked when a company’s cash inflows are insufficient to meet its financial obligations, rationalized for the sake of the market. By using this exception, Wheels Up was able to expedite the financing deal and secure the needed funds more quickly.
After the deal, Wheels Up will have access to Delta’s private jets, giving them the opportunity to expand their aircraft arsenal, fly longer trips and provide its members with the option to earn Delta SkyMiles and other perks.
“Wheels Up, which offers membership-based and on-demand private jet services, is a meaningful part of Delta’s broad portfolio of premium partners,” the press release said. “The relationship dates to 2020, when Delta Private Jets combined with Wheels Up.”
Jefferies has been active in expanding its aviation advisory arm through various financing deals and acquisitions. The firm’s role in the industry has attracted attention, and its future performance will be increasingly tied to its advisory activities.
