Air Canada sets tranches, talk in downsized $2.2 billion equivalent notes offering; pricing Tuesday

By Paul A. Harris

Portland, Ore., July 27 – Air Canada set tranche sizes and price talk in a downsized two-part offering of $2.2 billion equivalent of senior secured notes (Ba2/BB-/BB), according to market sources.

A $1 billion five-year bullet is talked to yield 4% to 4¼%, tight to early guidance in the mid-to-high 4% area.

The Rule 144A and Regulation S for life dollar-denominated notes have a par call six months prior to maturity.

Joint bookrunner Citigroup will bill and deliver. JPMorgan, TD, Barclays, BofA, Credit Suisse, Deutsche Bank and Morgan Stanley are the joint bookrunners.

A C$1.5 billion amount of eight-year notes is talked to price with a yield 75 basis points behind that of the U.S. dollar-denominated notes.

The Canadian dollar-denominated notes, formatted as a Rule 144A offering to non-Canadian investors and as a private placement to investors in Canada, become callable after 4.5 years at par plus 50% of the coupon.

Joint bookrunner TD will bill and deliver for the Canadian dollar-denominated tranche. Citigroup, JPMorgan, Barclays, BofA, Credit Suisse and Morgan Stanley are the joint bookrunners.

Books for both tranches were scheduled to close mid-morning on Tuesday, and the deal was set to price thereafter. That represents an acceleration in the timing of the deal which had previously been expected to remain in the market until Wednesday.

The Montreal-based international air carrier plans to use the proceeds to redeem, repurchase or discharge its C$200 million of first-lien senior secured notes due 2023 and C$840 million of second-lien senior secured notes due 2024, as well as to pay off $578 million outstanding under its existing U.S. term loan B due 2023 and $600 million outstanding under existing senior secured revolver due 2024, with the remainder to be used for working capital and general corporate purposes.

The size of the bond portion of the debt refinancing decreased from $2.75 billion equivalent. At the same time the bank loan increased to $2.5 billion minimum from $2 billion.

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