American International Group Inc.’s (AIG) aircraft leasing unit, International Lease Finance Corp. (ILFC), announced the issuance of notes worth $2.25 billion in a two-part offering.
Accordingly, one part of senior unsecured notes is valued at $1.0 billion. These notes were issued at a price of $100.00 and dated to mature on May 15, 2016. These five-year fixed rate notes are projected to have a spread of 393 basis points (bps) over the US Treasuries, bearing a fixed interest and yield rate of 5.75%. Interest on the notes is payable semi-annually, in equal instalments, commencing on November 15, 2011.
The second tranche of senior unsecured notes are worth $1.25 billion. These notes were issued at a price of $100.00 and dated to mature on May 15, 2019. These eight-year fixed rate notes are projected to have a spread of 308 bps over the US Treasuries, bearing a fixed interest and yield rate of 6.25%. Interest on the notes is payable semi-annually, in equal instalments, commencing on November 15, 2011.
Both the sets of unsecured notes carry a rating of “B1”, “BBB-” and “BB” from Moody’s Investor Service of Moody’s Corp. (MCO), Standards & Poor’s (S&P) and Fitch, respectively.
Concurrently, S&P has lifted ILFC’s senior unsecured debt grade by a notch to “BBB-”, the lowest in the investment grade category, from “BB+” and also affirmed its “BBB-” corporate credit rating.
Additionally, last week, Moody’s had also upgraded its outlook on ILFC’s credit to positive. These positive stances reflect the confidence on ILFC’s capital position and improved leverage that should be able to meet debt maturities and capital expenditures in 2011 and 2012. Moreover, the rating agencies believe that ILFC has sufficient liquidity that can mitigate risks from weak performances and the quality of assets.
Further, AIG’s ILFC appointed UBS AG (UBS), Barclays plc (BCS), JPMorgan Chase & Co. (JPM) and RBC Securities as the joint book-running managers for the sale. ILFC expects to utilize the proceeds from the senior unsecured notes to deliver its debt maturities due in 2012 and 2013.
ILFC was devoid of any liquidity during the peak of financial crisis in 2008 when it had drawn down its line of credit. However, this unit of AIG started improving its liquidity position in March 2010 with the markets starting to recover.
The company increased its liquidity by extension of its credit facilities, vending off aircraft and issuance of new debt through bonds and other debt securities. Through these measures ILFC could ultimately pay off its $2 billion loan in October 2010.
The enhanced financial leverage further allowed ILFC to raise $2.0 billion, in February this year, through an unsecured three-year revolving credit line. This division of AIG is revamping and wishes to restore its original glory. While AIG was thinking of disposing ILFC previously, it now plans to remain diversified through ILFC, with its core insurance operations.
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