United Airlines saw pricing come in above the attractive 4% mark on its $929.4 million aircraft debt deal due to rising US Treasury note yields, even as the spread tightened compared to the carrier's previous deal last year.
The $720.4 million senior A notes carry a coupon of 4.3% and the $209 million B notes a coupon of 5.375% of the 2013-1 enhanced equipment trust certificates (EETC) issue. This translates to spreads of 156bp and 263.5bp, respectively, over 10-year treasuries based on the 1 August close.
These are tighter than those on United's 2012-2 EETC, where the $711.6 million A tranche priced at 220bp over 10-year treasuries and the $132.3 million B tranche at 370bp over treasuries based on the 20 September 2012 close.
However, Chicago-based United is still paying a 30bp interest rate premium for the senior 2013-1 EETC notes as base rates rose. US treasuries yielded 2.74% for 10-year notes on 1 August compared to 1.9% on 20 September 2012, a 44.2% increase.
The yield on 10-year Treasury notes is up 47.2% from 1.86% at the beginning of the year.
United did not immediately comment on the spreads.
EETC issuers earlier this year were able to benefit from tightening spreads and strong market demand with sub-4% coupons. Hawaiian Airlines achieved a 3.9% coupon on the $328.3 million A tranche of its $444.5 million 2013-1 deal in May and US Airways secured a 3.95% coupon in the $620.1 million A tranche of its $819.6 million 2013-1 EETC in April.
United's 2013-1 EETC is secured by and finances 21 new Boeing aircraft, split between 18 737-900ERs and three 787-8s with deliveries from this October through June 2014. The specific aircraft can be selected from 24 737s and four 787s that are scheduled to be delivered during this period.
The A notes have a final maturity of February 2027 and the B notes of February 2023. Close is anticipated on 15 August.
Fitch Ratings rates the A notes A and the B notes BB+.
Credit Suisse, Citi, Deutsche Bank, Goldman Sachs and Morgan Stanley are bookrunners, and Credit Agricole and Natixis are co-managers. Wilmington Trust is trustee.