American Airlines Group Inc.

is kicking off a $7.5-billion sale of bonds and leveraged loans backstopped by its frequent-flyer program to repay U.S. government loans.

American Airlines Group Inc. is kicking off a $7.5-billion (U.S.) sale of bonds and leveraged loans backstopped by its frequent-flyer program, capitalizing on low borrowing costs to repay U.S. government loans that have helped it navigate the pandemic.

The carrier is marketing two $2.5-billion series of notes maturing in 2026 and 2029, and a term loan credit facility of the same amount due in 2028, according to a news release.

The new debt, which is secured against the company’s loyalty program, will help refinance American’s $7.5-billion Treasury loan, of which $550 million has been drawn to date, according to an investor presentation Monday.

Early pricing discussions are in the low-to-mid six per cent range for the five-year notes, and the mid-to-high six per cent range for the eightyear portion, according to people familiar with the matter, who asked not to be identified discussing a private transaction.

Initial pricing on the loan is being discussed at a spread of 500 to 525 basis points over the London interbank offered rate, plus an original issue discount of 98 cents on the dollar with a one per cent Libor floor, the people added.

American opted to refinance the Treasury loan with debt in an amortizing structure, which allows the company to pay back it in pieces leading up to maturity rather than all at once. The new financing gives American greater flexibility and also potentially increases the borrowing capacity of the AAdvantage program, a company spokesperson said.

The airline is returning to the market at a ripe time for borrowers: Funding costs are at historically low levels and risk appetite has been soaring as investors rush to get their hands on higher-paying assets. American borrowed $2.5 billion in June at an all-in yield of 12 per cent.

Barclays Plc is leading the loan deal and held a call with potential lenders earlier on Monday. Goldman Sachs Group Inc., which is leading the bond sale, was sounding out potential investors earlier this year for the deal, Bloomberg reported in February, after helping United Airlines Holdings Inc. with a similar debt offering in June.

Representatives for Barclays and Goldman Sachs declined to comment. The bond sale is in marketing through March 10 and expected to price thereafter.