Atlas Air predicts $285 million free cash flow; leverage to improve

By Devika Patel

Knoxville, Tenn., June 25 – Atlas Air Worldwide Holdings Inc. has completed a number of “favorable” financings and has refinanced “a significant portion” of its debt in the past few years.

The company expects its net leverage ratio will improve “gradually” from the current 4.9x position and intends to generate $285 million of free cash flow this year.

“Over the past several years, our discipline and our balance have enabled us to ... refinance a significant amount of long-term debt at substantially lower rates,” executive vice president and chief financial officer Spencer Schwartz said at the company’s investor day presentation on Monday.

“We did that while maintaining a healthy cash position and strong balance sheet,” Schwartz said.

The company’s net leverage ratio was 4.9x in the first quarter of 2018, compared to 4.8x in the prior quarter.

“Our net leverage ratio has remained fairly consistent since 2016 while we’ve grown our fleet,” Schwartz said.

“We remain committed to maintaining a strong balance sheet as we grow and we expect our net leverage ratio to improve gradually over the next few years as we place more aircraft in service and generate higher EBITDAR,” Schwartz said.

The company foresees raising $285 million of free cash flow this year.

“We expect free cash flow of approximately $285 million this year,” Schwartz said.

The company is pleased with its financing history.

“We have a history of favorable financings,” Schwartz said.

“It includes a two-tranche structure that financed a portion of our 767s for Amazon by incorporating a private placement with an equipment note resulting in a beneficial weighted average rate for the company, two well-received low-coupon convertible note issuances that enabled us to retire higher-cost debt, enhance business and financial flexibility and support long-term growth and groundbreaking export agency transactions guaranteed by the U.S. Export-Import Bank and U.K. Export Finance regarding 747-A aircraft, engine overhauls and upgrades.

“The net result is that our debt has a low weighted average coupon rate of 3.15%.

“Almost all of that is at a fixed rate and the vast majority is secured by aircraft assets that have a value that is greater than the debt,” Schwartz said.

Atlas Air is a Purchase, N.Y. provider of air cargo and related services.

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