Spirit Airlines talks $600 million five-year secured notes at discount to yield 8¼%-8½%

By Paul A. Harris

Portland, Ore., Sept. 1 – Spirit Airlines, Inc. talked its $600 million offering of five-year first-lien senior secured notes (//BB+) to price at a discount with an all-in yield of 8¼% to 8½%, according to market sources.

Initial guidance was in the 8¾% area, according to a bond trader, who added that there were reverse inquiry orders for the notes amounting to 50% of the offering.

Books close at 5 p.m. ET on Tuesday, and the Rule 144A and Regulation S for life notes are set to price Wednesday morning.

Barclays, Citigroup, Deutsche Bank and Morgan Stanley are the joint bookrunners.

The notes become callable after three years at par plus 50% of the coupon. There is a 40% equity clawback at par plus the coupon and a 101% poison put.

There is a special interest rate trigger that will increase the coupon by 2% if the loan-to-value ratio exceeds 62.5%. The higher rate remains in place until the LTV ratio falls below that threshold. Valuation is set to be tested semi-annually.

The issuing entities will be Spirit Loyalty Cayman Ltd. and Spirit Cayman Ltd.

The notes are secured on a first priority basis by the cash revenue from Spirit’s co-branded credit card programs and $9 Fare Club, intellectual property required or necessary to operate Spirit’s loyalty program, Spirit’s brand intellectual property, the equity interests of Spirit Finance Cayman 1 Ltd. and Spirit Finance Cayman 2 Ltd. (the “HoldCos”) and the accounts of the issuers.

Affirmative and negative covenants include standard reporting covenants, separateness covenants with respect to the issuers and the HoldCos, limitations on material adverse changes to the loyalty programs, as well as limitations on liens on the collateral, transactions with affiliates, fundamental changes, and changes of control.

Maintenance covenants require a minimum unrestricted liquidity of $400 million to be maintained by Spirit Airlines at all times.

Proceeds will be used for general corporate purposes and to fund a reserve account.

Spirit Airlines is a Miramar, Fla.-based airline.

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