Credit Suisse Securities says Air Berlin's planned €100-€150 million bond issuance at 11.5% coupon is expensive.
The German carrier intends to issue new three-year bonds in an initial aggregate principal amount of up to €100 million, which may be increased by up to €50 million, as it plans to use the net proceeds to refinance its existing indebtedness. The proceeds are to be used to buy back 1.5% coupon €220 million convertible bonds due in 2027, of which €136 million are still outstanding.
"We deem the 11.5% coupon on a planned €100-€150 million bond issuance as expensive, and compare it to 8.25% payable on the April 2011 €150 million issue (albeit with a maturity in 2014 versus 2018)," write Credit Suisse Securities in a research note.
Credit Suisse Securities adds that the proceeds will also be used to alleviate some short-term liquidity concerns.
The bonds will be issued at 100% of their principal amount and will be redeemed at 100% of their principal amount on 1 November 2014, subject to prior early redemption. The bonds denominated into units with a nominal value of €1,000.
Subject to an early closure, the subscription period will run from 26 October through 28 October 2011. The issue date for the bonds is expected to be 1 November 2011.
Quirin bank AG is the lead manager of the bond issue while Morgan Stanley Bank AG is mandated to act as exclusive dealer manager and tender agent.