Wesco PattonAir launches downsized $2.1 billion three-part notes offering; books close Tuesday

By Paul A. Harris

Portland, Ore., Nov. 8 – Wesco PattonAir downsized the struggling three-part junk bond deal backing its acquisition/merger financing to $2.1 billion from $2,175,000,000 and launched all three tranches with wider pricing and further revisions on Friday, market sources said.

The revised deal comes in a downsized $1.55 billion amount of senior secured notes (B3/B) in two tranches.

They include a $600 million tranche of five-year notes, which are non-callable for two years, launched with an 8½% coupon at 99 to yield 8¾%. Earlier in the week the five-year secured notes were talked to yield 8¼% to 8½%.

The secured part of the deal also includes $950 million of seven-year notes, which are non-callable for three years, launched with a 9% coupon at 99 to yield 9.2%. Earlier in the week the seven-year secured notes were talked to yield 8¾% to 9%.

The secured portion of the deal was first announced to the market as a single $1 billion tranche of seven-year notes with early guidance in the high 7% area. The secured portion of the deal increased to $1.6 billion when the borrower withdrew a proposed $600 million term loan, shifting proceeds to the secured notes.

The ensuing downsizing to $1.55 billion from $1.6 billion will be incurred by means of a $50 million draw on the ABL facility.

The secured notes covenants were also stiffened in favor of lenders.

Par offers for annual amortizations of 1% in years one and two, 1.5% in year three and 2% in year four and thereafter replace a 1% sinking fund.

An excess cash flow sweep covering both tranches of secured notes increased to 75% from 50%.

Changes announced Friday also included a downsize of the eight-year non-call-three-year senior unsecured notes (Caa2/CCC+) to $550 million from $575 million, and wider pricing.

The unsecured notes launched with a 13 1/8% coupon at 97 to yield 13.76%. Price talk was 425 basis points to 450 bps behind the seven-year secured notes, implying a 13% to 13½% yield. Earlier guidance had the unsecured notes coming 350 bps behind the seven-year secured notes (then talked in the high 7% area) implying a yield in the low-to-mid 11% area.

The $25 million downsize of the unsecured notes will also be covered by means of a draw on the ABL facility.

Books close at 5 p.m. ET on Tuesday. Earlier timing had the books becoming subject on Nov. 6. The deal was announced to the market on Oct. 18, at which time a roadshow commenced.

BofA Securities Inc. is the left bookrunner for the Rule 144A for life deal. Deutsche Bank Securities Inc., Jefferies LLC, Barclays, BNP Paribas Securities Corp., Goldman Sachs & Co. LLC and HSBC Securities (USA) LLC are the joint bookrunners.

Proceeds will be used to help fund the buyout of Wesco and fund the merger of Wesco with Pattonair USA, Inc., a provider of supply chain management services for the aerospace and defense industries.

Proceeds from the note sale will also be used to repay debt.

The issuing entity will be Wolverine Escrow, LLC, which is to be merged with an into Wesco Aircraft Holdings, Inc.

Wesco is a Valencia, Calif.-based supply chain services provider to the aerospace industry.

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