American Airlines sells US$1.14 billion in bonds for 32 planes
Airline results are being pressured now by higher oil prices
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[WASHINGTON] American Airlines Group on Monday (Apr 27) sold US$1.14 billion of bonds financing a group of planes.
The airline offered notes in two parts, with the longer portion having an average life of 7.7 years, according to a source with knowledge of the matter. The securities are a type of debt known as enhanced equipment trust certificates (EETCs), collateralised by 32 new and existing American Airlines planes.
The longer-dated notes, a US$905.04 million offering will yield 5.25 per cent after initially being discussed as yielding somewhere around 5.625 per cent. In October, American issued EETCs in a similar transaction, a sale that included US$883.63 million of notes with a weighted average life of 8.7 years, priced at a yield of 4.9 per cent.
The shorter nine-year notes will yield 5.75 per cent after initial pricing talk in the range of 6.125 to 6.25 per cent.
EETCs can allow junk-rated companies to borrow in investment-grade markets. S&P Global Ratings has American Airlines as a B+ company, or four steps below investment grade. The longer-term bonds it’s selling are expected to be graded A by S&P, well in the investment-grade range, and one notch lower by Fitch Ratings.
Airline results are being pressured now by higher oil prices. The cost of fuel, often an airlines’ second biggest expense, has been rising as the war in Iran constrains supply. Last week, American Airlines lowered its full-year earnings target, saying it may end 2026 with a loss as the carrier absorbs US$4 billion in additional fuel costs.
Goldman Sachs, MUFG and Morgan Stanley are the bookrunners for the latest bond sale. BLOOMBERG
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