AAdvantage starts roadshow for $5 billion secured notes in two amortizing bullet tranches

By Paul A. Harris

Portland, Ore., March 8 – American Airlines, Inc. and its AAdvantage Loyalty IP Ltd. frequent flyer program began a roadshow on Monday for a $5 billion two-part amortizing senior secured bullet deal, according to market sources.

It features $2.5 billion of five-year notes with initial guidance in the low-to-mid 6% area. The five-year notes, which have a two-year interest-only period, amortize at an annual rate of 33% beginning in year three. The expected average weighted life of the five-year notes is 3.7 years.

The deal also features $2.5 billion of eight-year notes with initial guidance in the mid-to-high 6% area. The eight-year notes, which have a five-year interest-only period, amortize at an annual rate of 33% beginning in year six. The expected average weighted life of the five-year notes is 6.7 years.

An investor call is scheduled to begin at 1 p.m. ET on Monday.

The roadshow runs through Wednesday, and the Rule 144A and Regulation S for life notes are set to price thereafter.

Sole structuring agent Goldman Sachs & Co. LLC is the left lead bookrunner. Barclays and Citigroup Global Markets Inc. are the joint lead bookrunners.

BofA Securities Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., ICBC Standard Bank plc, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, SMBC Nikko Securities America Inc., BNP Paribas Securities Corp., Credit Agricole CIB, HSBC Securities (USA) Inc., MUFG, Standard Chartered Bank, U.S. Bancorp Investments Inc. and BOK are the joint bookrunners.

Three months of interest payments will be escrowed in a reserve account up front.

The Fort Worth-based air carrier plans to use the proceeds plus a new $2.5 billion term loan to fund reserve accounts for the notes and loan, and to make an intercompany loan to American Airlines which will be used to pay off its Treasury term loan, with any remaining proceeds to be used for general corporate purposes.

Bond buyer protection includes a cash collection account comprised of collections from Citigroup, Barclays, American and other counterparties to the AAdvantage agreements. Collections will be deposited in a highly rated account bank and pledged to noteholders on a first-priority basis. That account will be subject to a simplified waterfall provision to be applied to pay agents’ fees and expenses, interest and amortization, to top up any reserve account deficiencies and to be used in the event of an early amortization event.

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