Air Canada sets yield talk in $700 million two-part notes offer; pricing Thursday

By Paul A. Harris

Portland, Ore., Sept. 19 - Air Canada set yield talk in its upsized $700 million two-part senior secured notes offer, a market source said on Thursday.

A $400 million tranche of six-year senior first-lien notes (expected ratings B2/B+), callable in three years at par plus 50% of the coupon, is talked to yield 6¾% to 7%. The tranche was added to the transaction earlier in the week, upsizing the bond deal to $700 million from $300 million, while the bank loan was downsized by $400 million.

A $300 million tranche of 6.5-year senior second-lien notes (Caa2/CCC+), callable in 3.5 years at par plus 50% of the coupon, is talked to yield 8¾% to 9%.

Books close at noon ET on Thursday, and the deal is set to price thereafter.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and TD Securities (USA) LLC are the joint bookrunners for the Rule 144A and Regulation S for life transaction.

The Montreal-based issuer, Canada's largest airline, plans to use the all of the proceeds to fund the tender offer for $600 million of its 9¼% senior notes due 2015, C$300 million 10 1/8% senior secured notes due 2015 and any and all of the 12% senior secured second-lien notes due 2016, with any remaining proceeds for general corporate purposes.

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