Allegiant sees tightening of unsecured spreads with $300m notes

Washington DC
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Allegiant Air has achieved tighter pricing on its $300 million senior unsecured notes due 2019, shaving nearly 20bp over the last US deal in the capital markets.

The Las Vegas-based ultra low-cost carrier priced its notes at 383bp over benchmark US treasury yields for an all-in coupon of 5.5%, according to a stock exchange filing. The debt matures in July 2019.

The last unsecured deal by a US carrier was United Airlines’ $300 million notes due 2020 that priced at 401bp over benchmark treasuries for a coupon of 6% in November 2013.

Moody’s Investor Services and Standard & Poor’s (S&P) rate the Allegiant notes B2 and BB-, respectively, which are both non-investment grade speculative ratings. The United notes are rated comparably at B2 and B by the two agencies respectively.

Air Canada priced $400 million in senior unsecured notes due 2021 at 558bp over seven-year US treasuries for a coupon of 7.75% in April.

Allegiant will use the $297.7 million in net proceeds from the issue to fund its purchase of 23 used Airbus A320 family aircraft in two deals that together are valued at $307.2 million. The aircraft include eight A319s and three A320s from GECAS and 12 A319s that are leased to a European carrier and will transition to Allegiant in 2018.

The airline anticipates having an all-owned fleet by 2018.

Goldman Sachs is the sole bookrunner and Wells Fargo is trustee.