American Airlines upsizes to $1 billion, talks secured notes to yield 8½%-8¾%; pricing Friday

By Paul A. Harris

Portland, Ore., Nov. 17 – American Airlines, Inc. upsized its offering of senior secured notes due May 15, 2029 (expected Ba2/expected BB/confirmed BB-) to $1 billion from $750 million on Friday, according to a syndicate source.

Along with the upsize came price talk of 8½% to 8¾%.

Books were scheduled to close late Friday morning, and the deal is set to price thereafter.

The Rule 144A and Regulation S for life 5.5-year notes come with two years of call protection. A special call provision allows the issuer to redeem 10% of the notes annually at 103 during the non-call period.

A special provision in the indenture would increase the coupon by 200 basis points during periods in which the collateral coverage ratio is less than 1.6 times. (62.5% loan-to-value), tested twice a year.

Security is a first priority lien on certain SGR for scheduled services from U.S. airports (other than DCA and LGA) to certain airports in Australia, Canada, the Caribbean, Central America, China, Hong Kong, Japan, Mexico, South Korea, and Switzerland, with a second priority lien on certain SGR for scheduled services from U.S. airports (other than DCA and LGA) to LHR and certain airports in the European Union that will be automatically released upon the satisfaction and discharge of all existing notes collateral.

There is a collateral appraisal delivery requirement of twice per year.

Sole structuring agent Citigroup Global Markets Inc. is a joint lead bookrunner. BofA Securities Inc. and Morgan Stanley & Co. LLC are also joint lead bookrunners.

Barclays, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, SMBC Nikko Securities America Inc., BNP Paribas Securities Corp., Credit Agricole CIB, MUFG Securities Americas Inc., U.S. Bancorp Investments Inc. and BOK Financial Securities Inc. are joint bookrunners.

In addition to upsizing the notes, the company also increased its concurrent term loan to $1.1 billion from $750 million.

The Fort Worth-based airline plans to use the bond and loan proceeds, including the incremental proceeds resulting from the upsizing of both of the tranches of new debt, to fund a full redemption of the 11¾% secured notes due 2025 as opposed to the previously planned partial redemption.

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