Allegiant taps capital markets to finance new jets

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Allegiant Air plans to finance the purchase of new Airbus A320 family aircraft with the issue of $300 million in senior unsecured notes that it announced earlier today.

The Las Vegas-based carrier will use part of the net proceeds to pay for 12 A319s it will acquire in a deal estimated to cost $94.2 million in cash and $142 million in assumed debt, says Allegiant in a stock exchange filing today. The 12 A319s are now on lease to an European carrier through 2018, when it will join Allegiant's fleet.

The rest of the proceeds from the notes offering will be used to purchase 11 A320 family aircraft under contract or letter of intent for purchase this year and in 2015, in a deal valued at $213 million in cash.

The 11 A320 family aircraft include two A319s now on lease to Allegiant from GECAS and six additional A319s from the lessor that will be delivered this year and in 2015. In addition, Allegiant had entered into purchase agreements in August 2013 to purchase two A320s that obligate the carrier to pay $23.4 million this year upon delivery. The remaining aircraft is an A320 that Allegiant announced on 13 June that it would purchase upon delivery in 2015.

Allegiant has not provided pricing guidance for the unsecured notes. However, Avianca achieved a 7.44% coupon on its $250 million senior unsecured notes due 2020 and Air Canada a 7.75% coupon on its $400 million senior unsecured notes due 2021 in April.

The ultra low-cost carrier’s new notes are due in 2019 and rated B1 by Moody’s Investors Services.

Jude Bricker, treasurer of Allegiant, told Flightglobal in April that it planned to finance new Airbus A320 family aircraft in its fleet with bank debt. He said the airline lacked the necessary scale to tap the capital markets.

“The bank market is very strong right now,” he said.

Allegiant has actively managed its debt obligations since April. The airline prepaid its $121.5 million secured term loan due March 2017 and the balance of its $8.5 million secured notes due June 2016 in April.

It also borrowed $45.3 million secured by 54 Boeing MD-80s in its fleet the same month. The amortising, variable rate debt has a balloon payment due at maturity in May 2018.

In May, the airline closed a $40 million secured loan backed by its six Boeing 757-200s with CIT. The amortising, variable rate loan has a balloon payment at maturity in May 2018.