Avation PLC reaches deal to extend maturity of 6.5% notes due May 2021

Avation PLC has reached an agreement in principle with holders of its $342.6 million of Avation Capital SA 6.5% senior notes due May 15, 2021, to extend the bonds' maturity in exchange for additional interest, warrants and a consent fee. The company anticipates the agreement will be put into effect through a consent solicitation to be launched no later than Feb. 19.

Holders of 76% of the notes have entered into a lockup agreement to vote in favor of the transaction. Avation noted that the 76% figure is "sufficient, subject to senior lender consents where applicable, to implement the transaction" following the solicitation.

Details of the agreement include extending the notes' maturity to Oct. 31, 2026; paying either 1.75% cash or 2.5% in-kind interest, at the company's option, in addition to the 6.5% coupon; a fee of up to 75 basis points for early consents and 25 basis points for late consents; and issuing to bondholders a total of 6 million warrants expiring in October 2026 for ordinary shares priced at 114.5 pence per share.

"We believe that this more than five-year bond maturity extension stabilizes an important part of the capital structure," stated Jeff Chatfield, Avation's executive chairman, in a Feb. 9 press release. He added that the company has the option of refinancing the notes at any time.

S&P Global Ratings today downgraded Avation to CC from CCC- and kept the company on Credit Watch Negative. The unsecured bonds were downgraded as well to C from CC. Ratings said the credit watch takes into account a likely downgrade to Selective Default when the restructuring closes, which the rating agency expects to be by early March.

Ratings said it downgraded the bonds because the maturity extension and other proposed revised terms "were not in line with the original terms of the bond." The rating agency also noted that downward lease adjustments and deferments and plane repossessions will "eat into Avation's balance sheet and chalk up higher impairment charges."

Singapore-based Avation leases commercial passenger aircraft to airlines, owning and managing a fleet of 46 aircraft.