AerCap’s jumbo bonds flies

Dino D'Amore
By Dino D'Amore May 19, 2016 19:54

AerCap’s jumbo bonds flies

AerCap’s most recent senior unsecured bond issuance has been a resounding success as investors clamoured for the aircraft lessor’s paper. The notes were priced at 395 basis points (bps) on May 17 but tightened to 270bps. AerCap successfully upsized the benchmark offering from $750 million to $1bn due to demand. This was despite the fact that the tenor of the bonds was extended to 2022 pushing the notes further towards six years than five year paper so AerCap could cover some maturities falling due in 2021. This extension did not seem to have any effect on investor interest and sources suggest that the tight pricing is also because investors have already priced in the expectation that AerCap will be rated investment grade by two out of the three rating agencies by the end of the year. This issuance was sold from investment grade syndication desks and on a spread rather than a coupon basis. The book has been described as high quality with only one or two hedge fund investors.

AerCap is a conservative issuer of debt and with the markets being so strong, the timing was right to come to market despite concerns over volumes, especially on the back of the Dell issuance, in what has resulted in the busiest week for bond issuance since January. With the BOC Aviation IPO in the market and a few more deals also closing in this sector, investors were tuned into the aircraft leasing story, which continues to attract new investment thanks to the stable returns aided by the recent good health of their airline customers. AerCap is expected to come back to the market later this year with a repeat issuance as in previous years.

Barclays Capital, Mizuho Securities, RBC Capital Markets and Wells Fargo Securities are joint bookrunners for the offering.

Our thoughts and prayers go out to the families and friends of the lost Egyptair  aircraft, Fight MS 804 from Paris, France to Cairo, Egypt, which disappeared from radar screens at around 02:30 am (Egypt local time) today over the Mediterranean sea.

Dino D'Amore
By Dino D'Amore May 19, 2016 19:54