Southwest Airlines closes $400 million debt sale

DALLAS

Southwest Airlines Co. said Tuesday it closed the sale of $400 million of debt secured by interest in 17 Boeing jets.

Southwest, which had previously announced it would issue the debt, said the private placement closed on Dec. 30.

The notes are due in 2011 and bear an annual interest rate of 10.5 percent with payments starting June 15 of this year, the Dallas-based discount carrier said in a filing with the Securities and Exchange Commission.

Southwest and other airlines have been mortgaging planes and taking other steps to raise cash to prepare for an expected slump in air travel and tight credit markets.

Southwest said it would use proceeds from the debt sale for general corporate purposes, which could include providing cash collateral for some of the company's fuel-hedging deals.

The airline benefited for several years from aggressive hedging against rising oil prices, but with the recent collapse in oil prices, it has been forced to post more collateral. Southwest lately has been unwinding some of its hedged positions.

Shares of Southwest rose 25 cents, or 2.9 percent, to $8.93 in morning trading.