Avolon upsizes $2.5 billion notes; Fannie Mae sells notes; Public Storage improves

By Cristal Cody

Tupelo, Miss., April 11 – Avolon Holdings Ltd. subsidiary Avolon Holdings Funding Ltd. priced an upsized $2.5 billion of guaranteed senior notes in three tranches on Thursday in an otherwise quiet deal session.

Avolon held fixed income investor calls on Tuesday and Wednesday for the offering that secured high-grade ratings.

“Our achievement of an investment-grade rating, ahead of the expected timeframe, reflects the progress we have made to increase the level of unencumbered assets within the business and our metrics as an industry leader in terms of scale, asset quality and airline customer diversification,” Avolon chief financial officer Andy Cronin said in a news release. “An investment-grade rating will provide us with even greater financial flexibility and access to a deep pool of capital.”

In other supply on Thursday, Fannie Mae priced $2 billion of 2.25% three-year Benchmark Notes at the start of the session with a spread of 6.5 basis points over Treasuries.

Corporate deal volume week to date totals more than $8.5 billion, compared to the $15 billion to $20 billion of supply syndicate sources predicted for the week.

The Markit CDX North American Investment Grade 32 index improved nearly 1 bp on Thursday to a spread of 58 bps.

In the secondary market, new issues priced this week traded mostly stronger, according to a market source.

Public Storage’s 3.385% senior notes due May 1, 2029 (A2/A) tightened more than 5 bps in the secondary market to trade in the 86 bps area.

The Glendale, Calif., real estate investment trust sold $500 million of the notes on Wednesday at a spread of 92 bps over Treasuries.

Waste Connections, Inc.’s 3.5% senior notes due May 1, 2029 (Baa2/BBB+/BBB+) that priced on Tuesday softened about 2 bps on Wednesday but remain about 2 bps better than issuance, a source said.

The company priced $500 million of the 10-year notes on Tuesday at a spread of Treasuries plus 103 bps.

Market sources had an eye on economic data releases at the start of the day. The U.S. Department of Labor reported initial unemployment claims for the past week were 196,000, less than the 210,000 economists expected and the first time that weekly claims have been below 200,000 since November 1969, according to a Confluence Investment Management LLC report.

Avolon sells three tranches

Avolon Holdings Funding priced an upsized $2.5 billion of guaranteed senior notes (Baa3/BBB-/BBB-) in three tranches in a Rule 144A and Regulation S offering on Thursday, according to a market source and news release.

The company sold $750 million of 3.625% three-year notes to yield 3.65% with a spread of 135 bps over Treasuries.

A $1 billion tranche of 3.95% five-year notes priced with a 4.064% yield, or a spread of Treasuries plus 175 bps.

Avolon sold $750 million of 4.375% seven-year notes to yield 4.454% and a Treasuries plus 205 bps spread.

The notes priced on the tight side of guidance and were upsized from an initial launch of $1.8 billion of bonds.

Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were the bookrunners.

The notes are guaranteed by the parent company and certain subsidiaries.

The aircraft leasing company is based in Dublin.

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