US Airways upsized $546m EETC on strong demand

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US Airways increased its 2012-2 secured enhanced equipment trust certificate issue to $546.2 million on strong market demand after launching two smaller deals.

The Tempe, Arizona-based carrier launched the deal with a two-tranche $476.7 million financing for 10 Airbus A321 and A330-300 aircraft and a smaller issue for one A330-300 but combined the transactions into a single larger deal after receiving strong interest from investors, says Tom Weir, vice-president and treasurer of US Airways.

"We were concerned about the fiscal cliff and didn't want to put too large of a deal in the market," he says. "We were happy with the transaction. It shows the market for this product is very hot."

The 2012-2 issue was split between a $418.1 million A tranche and a $128.1 million B tranche. The A tranche carries a 4.625% coupon and matures in December 2026 with an initial loan value of 55.2%, and the B tranche carries a 6.75% coupon and matures in December 2022 with an initial loan value of 72.1%.

The deal finances seven A321s with deliveries between May 2013 and August 2013, and four A330-300s with deliveries between May 2013 and October 2013.

Fitch Ratings rated the A tranche A- and the B BB-, Moody's rated the A Ba1 and the B B1, and Standard & Poor's rated the A BBB and the B B+.

Barclays Capital, Citi, Goldman Sachs, Merrill Lynch and Morgan Stanley underwrote the issue.

US Airways' coupon is slightly higher than that on United Continental's $843.9 million secured EETC issue in September, when the Chicago-based airline achieved 4% and a 5.5% interest rates on the two-tranche aircraft debt.

The airline has six aircraft deliveries in 2013 that still need financing, says Weir. This includes five A321s and one A330-300.

US Airways is considering sale and leaseback or "mixed market" transactions, which combine bank debt and institutional financing, for the additional 2013 deliveries, he says.

Weir says that US Airways has a request for proposals out to lenders now, anticipates discussions in January 2013 with close before the end of the first quarter.