Air Lease (AL) 11/15/11

$300m (+45m) 144a senior unsec cb tonight from JPM/NOM/BARC/C. Terms: 7yr bullet, 2.875%-3.375% up 33.5-38.5, prot. UOP = acq of commercial aircraft & gcp. Aircraft leasing company, launched in 2010 and IPO’d April 2011. 7.5 levered w/,ore debt to fund acq committments expected (239 planes for $11.7B). $1.3B of debt is secured (~62%) w/balance incl converts. Given their biz & 7 yr structure, we believe L+750 is appropriate. Stk brw is not normal: ~neg 1.5%, which may get worse b4 btr (when IPO shrs unlocked, gc brw adds 3 pts to bond value). Using 35v, theo = 97.375. Global macro worries, high lev & a cb mkt that exhibits no gamma 2 downside, we can not get onboard.
AVOID
Aircraft leasing company, launched in 2010
PF Cash $571m
PF Debt $2103m
LQA EBITDA $280m
LQA FCF -$1856m
Leverage 7.5x
Mkt Cap $2313m
Co started 2010 w/IPO 4/11. Growing rapidly w/79 planes & plans for 101 YE11 &146 YE12. Committments for 239 planes for $11.7B. Lease for all 67 committed thru YE12. $1.3B debt secured (~62%) w/bal incl convert unsecured. Nearly $600m avail on fac, most secured. Cash provides add’l liquidity, but will keep adding debt to fund acq committments. Fleet young avg age 3.6 yrs & >6 yrs on lease, but volatile ind w/global macro uncertainty & high fuel prices are key concerns. Our assigned spread L+750

By convertarb, on November 15, 2011 at 5:48 pm, under Convert New Issue Analysis. No Comments
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