AerCap Holdings NV, via joint issuing subsidiaries AerCap Ireland Capital Designated Activity Co. and AerCap Global Aviation Trust, is in the market with a sprawling benchmark offering of SEC-registered senior notes in as many as nine parts, as the company seeks funding for the $24 billion cash consideration for its acquisition of GE Capital Aviation Services Inc., or GECAS, from General Electric Co.
Today's announcement follows on investor presentations that commenced yesterday, via joint global coordinators Citi and Goldman Sachs. Joint bookrunners also include BofA Securities, Barclays, Credit Agricole, Deutsche Bank, J.P. Morgan, Mizuho Securities, Morgan Stanley, RBC Capital Markets, Santander, BNP Paribas, Credit Suisse, HSBC, TD Securities, Truist Securities, Wells Fargo Securities, MUFG, Societe Generale and Fifth Third Securities.
Early whispers started in the areas of T+90 for two-year notes (and the Sofr equivalent for a same-dated issue of floating-rate notes), T+110 for three-year notes, T+120 for three-year (non-call one) notes, T+150 for five-year notes, T+175 for seven-year notes, T+190 for 10-year notes, T+205 for a 12-year issue, and T+205 for 20-year bonds.
The acquisition terms call for GE to receive 111.5 million newly issued AerCap shares, $24 billion of cash and $1 billion of AerCap notes and/or cash. Citi and Goldman Sachs provided AerCap with $24 billion of committed financing for the transaction, which is expected to close by the end of the year. The bridge financing now includes a $19 billion, 365-day tranche, which will be reduced dollar-for-dollar with the proceeds of the new bond offering. Any excess proceeds would reduce lender commitments under a$5 billion term loan credit agreement.
AerCap, in regulatory filings, noted that it may tap the debt markets for up to $2.5 billion of additional funds, depending on the ultimate proceeds of the dollar-denominated placement. It said such borrowings may come in the form of term loan borrowings secured by certain of AerCap’s currently unencumbered aircraft, senior unsecured euro-denominated notes via a euro medium-term note program, or other debt channels.
The notes are guaranteed by the parent company. Expected ratings are BBB/Baa3/BBB-.
Fitch on Wednesday said it expects to rate the new unsecured M&A notes at BBB-, under a Rating Watch Negative. However, it said that it would remove the Rating Watch Negative and assign a stable outlook to the company if AerCap issues enough term financing to repay a "sufficient" portion of that $19 billion, 365-day facility. Fitch noted AerCap's commitment to maintaining a minimum liquidity coverage ratio of 1.2x-1.5x, and its plan to reduce leverage to its long-term adjusted debt-to-equity target of 2.7x within 12 months of the closing. Pro forma for the acquisition, Fitch projected AerCap's liquidity coverage ratio to be above 2.0x and its debt-to-tangible equity ratio at 3.1x.
Moody's yesterday assigned a Baa3 rating to the proposed notes, under a stable outlook. The agency cited the company's "commitment to strong liquidity management with a liquidity sources-to-uses target ratio of at least 150% post-closing." It also noted that AerCap bolstered its backup liquidity ahead of closing the GECAS acquisition with a $4.35 billion boost to its revolving credit commitments, to a total of $9 billion.
