Citibank is syndicating a $200 million credit line for Dallas-based Aviall after nudging out previous lead FleetBoston Financial with the offer of a debt and equity package. David Leedy, director of investor relations at the aviation parts and aftermarket services provider, said talks were held with both Citi and Fleet, but the impact of Sept. 11 on the markets blocked any chance of a straight loan. "The company could have financed this deal prior to Sept. 11 without the equity investment," he said.
The equity infusion was required and Fleet could not arrange it, Leedy said. Citi was also able to offer more attractive terms than Fleet, he added. The financing was crucial in Aviall winning a $3 billion contract with Rolls-Royce, because it will fund working capital requirements. Fleet is being offered a role in syndication, he added. Spokespeople at Fleet did not return calls.
The credit is part of a new capital structure, designed to support the 10-year Rolls-Royce contract for aftermarket-parts supply. The credit is in addition to $80 million of senior unsecured notes provided by a consortium of private debt-investors, including Whitney & Co., The Blackstone Group, Oak Hill Advisors and The Carlyle Group. Forty-five million of convertible preferred stock will be sold to Carlyle. The equity investment is necessary to complete the financing, "but it is not undesirable, in fact it is desirable, to bring in investors like Carlyle," Leedy commented. Carlyle has expertise in aerospace and defense and will join Aviall's board of directors. Salomon Smith Barney advised the company on all aspects of the transaction including the loan. The previous credit line was a $130 million Fleet led line, expanded to $160 million with a spread of 2 1/4 % over LIBOR. Leedy would not comment on the new pricing, as the loan has not yet closed.