International Lease Finance Corp., a provider of aircraft operating leases, is talking to its lead banks about refinancing and is said to be coming to the market with a revolver as large as $2.7 billion in mid-November. The market is less than ideal for credits associated with the airline industry given the problems facing those companies. But ILFC has the potential support from parent American International Group, a AAA rated company. Additionally, it has a diverse portfolio of new aircraft and only about 15% of revenues from U.S. airlines, said Standard & Poor's analyst Philip Baggaley.
Salomon Smith Barney, the existing lead, is expected to be the lead agent on the deal, according to market sources. Salomon is currently talking to the leasing company about the size of the revolver and pricing terms. No potential price levels could be ascertained. The current $1.8 million revolver has a slender LIBOR plus 19 basis points spread, according to Capital DATA Loanware. Low interest rates should keep refinancing costs in check and reduce pressure on revenues, one source noted.
ILFC likely faces higher rental delinquencies and defaults among its airline customers and depressed rates on new aircraft leases over the next several years, Baggaley said. Additionally, the fact that the current economic downturn is more global and that terrosist threats could affect all air travel could pose more problems. Debt to capital levels could climb, as debt is added to fund committed aircraft deliveries and if ongoing aircraft sales are deferred to avoid selling planes at distressed values, but the outlook is only negative at AA-.