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Gogo Unwinds $525M High Yield Deal After Striking Airline Deal

Airplane wi-fi provider Gogo today announced that it will be unwinding the sale of a $525 million issue of 12% secured notes due 2022 from earlier this week ahead of settlement today because it “received a proposal from a major airline customer under which Gogo would provide connectivity service on a meaningful portion of the airline’s domestic fleet,” according to a company statement.

All trades will have to be unwound for the paper, including 101.5 and 101.75 most recently and that context generally all week, from quotes of 101/101.5 on the break late on Monday, versus par issuance. As reported, joint bookrunners on the B–/B2 transaction were Morgan Stanley, J.P. Morgan, and Bank of America, with co-managers Evercore and UBS.

This is a rare pre-settlement move by an issuer not seen since Legends Gaming backed out of its placement in late 2007 andCablevision iced an offering after cancelling a dividend back in 2005. Of course, there were unwinds more recently, but related to failed M&A, like Charter and Dish in recent years.

Proceeds from the 144A-for-life deal from Gogo were to be used to pay down all of the company’s term debt, which was roughly $288 million at the end of the first quarter, and additional proceeds will be used to support working capital and for general corporate purposes, including the roll-out of next-generation product and technology.

Details of the airline-deal arrangement remain subject to negotiation, but the bonds will nonetheless not close for settlement today, the company said.

Gogo is Nasdaq-listed, but recall that TCP Capital expanded its investment in the company a year ago through the addition of a $15 million senior secured loan in the first quarter. See “TCP Capital adds more first-lien debt to Gogo in Q1,” LCD News, May 26, 2015. TCP Capital is a BDC that invests in middle market companies.

Chicago-based Gogo provides communications services to commercial and business aviation through strategic alliances with satellite operators, and it’s currently carrying an approximate $820 million market capitalization. Trailing 12-month net revenues of around $527 million boiled down to roughly $49 million in EBITDA, according to S&P Global Market Intelligence. — Matt Fuller

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This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.