United Airlines Holdings Inc. abandoned a $2.25 billion sale of junk bonds because it wasn’t satisfied with the terms, said people familiar with the transaction.

The airline ultimately reached a deal but decided to pull it to seek more favorable terms and potentially a different structure later, said one of the people, who asked not to be named discussing a private transaction. The offering fell flat with investors on concerns about the planes backing the debt.

Enticed by the hot market for junk bonds, United had been planning to use the new debt to refinance a $2 billion one-year term loan that the company signed with a group of four banks on March 9. At a yield of 11% based on unofficial price discussions, the potential interest rate was significantly higher than that on the loan, which pays a rate of as much as 2.5 percentage points above the London interbank offered rate over the course of the year.

United declined to comment. In a regulatory filing Friday, the company said it had “decided not to proceed with its previously announced proposed offering.” JPMorgan Chase & Co., which was leading the deal, declined to comment.

U.S. Aid

The Chicago-based airline, which is getting $5 billion in payroll assistance from the U.S. government and has access to a potential federal loan of $4.5 billion, is seeking to raise additional money amid the worst crisis in the history of the airline industry. In the U.S., passenger totals have tumbled more than 90% as Covid-19 has all but erased travel demand.

United fell 2.4% to $24.81 after the close of regular trading in New York. The shares have tumbled 71% this year, the biggest decline on a Standard & Poor’s index of major U.S. airlines.

The company and its rivals absorbed another blow this week after Warren Buffett said Berkshire Hathaway Inc. had exited its stakes in United, Delta Air Lines Inc., American Airlines Group Inc. and Southwest Airlines Co.

“The airline business—and I may be wrong and I hope I’m wrong—but I think it’s changed in a very major way,” the billionaire investor said May 2.

Aging Jets

In the bond market, investors had proven eager to lend to companies that have been hit hard by the coronavirus pandemic. But the weak reception to United’s deal signaled the limits after a surge in debt offerings.

United’s bonds were expected to price on Thursday but the deal dragged on as investors balked at the aging fleet of jetliners pledged as collateral. The notes are secured on a first priority basis by a pool of 360 aircraft owned by United.

Some investors were concerned that the planes weren’t valuable enough to balance out the risk of investing in an airline whose business has been hit as governments across the globe have restricted travel to help stem the virus’s spread.

As well as increasing the yield, United also added a clause that would trigger repayment of the bonds at a substantial premium to par, known as a make-whole, should the company file for bankruptcy.

Cash Burn

Like its peers, United is working to reduce how much cash it burns while revenues remain minimal. The company will trim its average daily burn by about half to $45 million or less this quarter.

The company has $9.6 billion in liquidity, not including the potential U.S. government loan. United has raised $4 billion since March and recently sold 22 new Boeing Co. aircraft—787 Dreamliner and 737 Max jets—in a leasing deal with a unit of BOC Aviation Ltd.

Earlier this week, United warned that it will cut at least 30% of managers and office staff in October as it anticipates depressed revenues well into 2021.