All Aboard Florida sets 12% area talk on upsized $405 million PIK toggle notes offering

By Paul A. Harris

Portland, Ore., June 16 – All Aboard Florida upsized its offering of five-year senior secured PIK toggle notes to $405 million from $390 million and talked the notes to price with a cash yield in the 12% area amid numerous changes to the structure of the deal, a market source said on Monday.

The PIK toggle coupon is structured so that the first coupon payment will be 50% cash and 50% PIK. Thereafter coupon payments may be made entirely in cash, or 50% cash and 50% PIK, with the PIK coupon paying a 75 basis points increase to the cash coupon.

A 25 bps coupon step-up takes effect after 90 days unless two ratings agencies assign ratings to the notes.

Call protection increased to 2.5 years from two years. The notes now become callable after 2.5 years at par plus 50% of the coupon.

The company may redeem the notes at par plus the full coupon with proceeds of a government loan during the first 2.5 years. This call premium increased from 75% of the coupon; the call period increased from two years.

Books close at 2 p.m. ET on Tuesday, and the deal is set to price Tuesday afternoon.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the joint bookrunners for the Rule 144A and Regulation S for life offering. BMO Securities is the co-manager.

Proceeds will be used to finance all or part of the design, construction, development and equipping of the Miami to West Palm Beach portion of a higher speed intercity passenger train line from Miami to Orlando.

The deal comes with a mandatory redemption at par if the company abandons the project before the opening deadline and with an offer to purchase the notes at par if the project fails to open by the opening deadline.

The issuing entities are AAR Holdings LLC and AAF Finance Co.

All Aboard Florida, a subsidiary of Florida East Coast Industries, is a Coral Gables, Fla.-based privately owned passenger rail system.

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