By Paul A. Harris
Portland, Ore., March 10 – American Airlines, Inc. and its AAdvantage Loyalty IP Ltd. frequent flyer program priced an upsized $6.5 billion of amortizing senior secured bullet notes (Ba2//BB) in two tranches on Wednesday, according to market sources
The deal, which was upsized from $5 billion, included an upsized $3.5 billion tranche of five-year notes that priced at par to yield 5½%, 12.5 basis points inside of yield talk in the 5¾% area. Initial guidance was in the low-to-mid 6% area. The tranche size increased from $2.5 billion.
The offering also included an upsized $3 billion tranche of eight-year notes that priced at par to yield 5¾%, 12.5 bps inside of yield talk in the 6% area. Initial guidance was in the mid-to-high 6% area. The eight-year notes were also upsized from $2.5 billion
The debt package, which was upsized to $10 billion from $7.5 billion, also included a term loan that was upsized to $3.5 billion from $2.5 billion.
That package, including both tranches of notes and the loan, was playing to demand in excess of $26 billion on Wednesday morning, including $11 billion of demand for the loan paper, sources said.
Sole structuring agent Goldman Sachs & Co. LLC was the left lead bookrunner for the bonds. Joint lead bookrunners were Barclays and Citigroup Global Markets Inc.
Joint bookrunners were BofA Securities Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., ICBC Standard Bank plc, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, SMBC Nikko Securities America Inc., BNP Paribas Securities Corp., Credit Agricole CIB, HSBC Securities (USA) Inc., MUFG, Standard Chartered Bank, U.S. Bancorp Investments Inc. and BOK.
Three months of interest payments covering the secured notes will be escrowed in a reserve account up front.
The Fort Worth-based air carrier plans to use the proceeds to fund reserve accounts for the notes and loan, and to make an intercompany loan to American Airlines which will be used to pay off its Treasury term loan, with any remaining proceeds to be used for general corporate purposes.
Bond buyer protection includes a cash collection account comprised of collections from Citigroup, Barclays, American and other counterparties to the AAdvantage agreements. Collections will be deposited in a highly rated account bank and pledged to noteholders on a first-priority basis. That account will be subject to a simplified waterfall provision to be applied to pay agents’ fees and expenses, interest and amortization, to top up any reserve account deficiencies and to be used in the event of an early amortization event.
| Issuers: | American Airlines, Inc. and AAdvantage Loyalty IP Ltd.
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| Amount: | $6.5 billion, increased from $5 billion
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| Securities: | Senior secured notes
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| Sole structuring agent: | Goldman Sachs & Co. LLC
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| Left lead bookrunner: | Goldman Sachs
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| Joint lead bookrunners: | Barclays and Citigroup Global Markets Inc.
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| Joint bookrunners: | BofA Securities Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., ICBC Standard Bank plc, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, SMBC Nikko Securities America Inc., BNP Paribas Securities Corp., Credit Agricole CIB, HSBC Securities (USA) Inc., MUFG, Standard Chartered Bank, U.S. Bancorp Investments Inc. and BOK
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| Trade date: | March 10
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| Settlement date: | March 24
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| Ratings: | Moody's: Ba2
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| Fitch: BB
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| Distribution: | Rule 144A and Regulation S for life
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| Marketing: | Roadshow
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| Five-year notes
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| Amount: | $3.5 billion, increased from $2.5 billion
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| Maturity: | April 20, 2026
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| Coupon: | 5½%
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| Price: | Par
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| Yield: | 5½%
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| Spread: | 468 bps
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| Interest only period: | Two years
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| Amortization: | 33% annually beginning in year three
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| Average life: | 3.7 years
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| Call protection: | Non-callable
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| Price talk: | 5¾% area
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|
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| Eight-year notes
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| Amount: | $3 billion
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| Maturity: | April 20, 2029
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| Coupon: | 5¾%
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| Price: | Par
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| Yield: | 5¾%
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| Spread: | 441 bps
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| Interest only period: | Five years
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| Amortization: | 33% annually beginning in year six
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| Average life: | 6.7 years
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| Call protection: | Non-callable
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| Price talk: | 6% area
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