Avolon Holdings Funding Ltd. today completed a $1.5 billion, two-part offering, split evenly across new 2026 and 2028 senior unsecured issues.
Avolon is the third aircraft lessor to tap the U.S. in the new year. Yesterday, California-based Aviation Capital Group LLC completed a $750 million offering of 2026 notes. Last week, Ireland-based AreCap Holdings, via subsidiaries, placed a $1 billion offering of 2026 notes.
The company today locked in lower funding costs relative to comparable-maturity offerings it completed earlier in the pandemic era. Avolon Holdings Funding last tapped the market in November 2020, when it placed a $1 billion offering of 4.25% long five-year notes due April 15, 2026, at T+385, or 4.256%. For reference, the issue traded yesterday at a G-spread of 204 basis points, according to MarketAxess.
Last September, it completed a $650 million offering of 5.50% long five-year notes due Jan. 15, 2026, at T+525, or 5.519%. For reference, the issue changed hands on Jan. 11 at a G-spread of 216 bps, traded data show.
In January 2020, prior to the spread and fallout of the COVID-19 pandemic, Avolon Holdings Funding placed a $1.75 billion, two-part offering, across 2.875% five-year notes due Feb. 15, 2025, at T+125, or 2.90%, and 3.25% seven-year notes due Feb. 15, 2027, at T+150, or 3.267%. For reference, the 2025 notes traded at the beginning of this week at a G-spread of 206 bps, according to trade data.
The issuer is a debt-issuing vehicle for Dublin-based parent Avolon Holdings Ltd, an aircraft leasing company.
Avolon Holdings, which started last year as a rising-star credit, currently teeters on the edge of IG territory, with negative outlooks all around.
Last September, Moody's confirmed its Baa3 rating and changed the outlook to negative, which concluded a review for downgrade commenced in June. "Avolon's negative outlook reflects Moody's expectations of a more extended and weaker recovery in air travel that results in higher risks to earnings, cash flow, liquidity and capital positions," Moody's said in September 2020.
S&P Global Ratings and Fitch's negative outlooks date to April and March, respectively, to reflect the fallout of the COVID-19 pandemic on the aircraft-leasing industry. Terms:
| Issuer | Avolon Holdings Funding Ltd. |
| Ratings | BBB-/Baa3/BBB- |
| Amount | $750 million |
| Issue | 144A/Reg S senior notes |
| Coupon | 2.125% |
| Price | 98.799 |
| Yield | 2.377% |
| Spread | T+190 |
| Maturity | Feb. 21, 2026 |
| Call | Make-whole T+30 until notes are callable at par from one month prior to maturity |
| Price talk | Guidance: T+200 area (+/- 5 bps); IPT: T+230 area |
| Issuer | Avolon Holdings Funding Ltd. |
| Ratings | BBB-/Baa3/BBB- |
| Amount | $750 million |
| Issue | 144A/Reg S senior notes |
| Coupon | 2.75% |
| Price | 98.753 |
| Yield | 2.946% |
| Spread | T+215 |
| Maturity | Feb. 21, 2028 |
| Call | Make-whole T+35 until notes are callable at par from two months prior to maturity |
| Trade (date) | Jan. 13, 2021 |
| Settle | Jan. 21, 2021 |
| Bookrunners | BNP/JPM/MIZ/MUFG/TFC |
| Price talk | guidance: T+225 area (+/- 5 bps); IPT: T+255 area |
| Notes | Proceeds will be used to repay future outstanding indebtedness |
Article updated at 12:10 p.m. ET on Feb. 2, 2021, to reflect correct spread.