American Airlines has secured a $1.2 billion investment by Goldman Sachs Merchant Bank in the form of two senior secured note transactions to be collateralised by intellectual property and other assets.
The financing includes a $1 billion commitment by the Goldman Sachs Merchant Bank’s West Street Strategic Solutions Fund I (WSSS) in the airline’s senior secured notes. WSSS is a flagship credit strategy focused on providing capital solutions to high-quality companies in complex situations.
The transaction represents the largest private placement in the USA by any investor in the airline sector, according to Goldman Sachs.
The deal priced on 22 July at 10.75% for a 5.5-year term. The deal is likely to close in September.
It has a non-call option at year four. American's 11.75% senior secured bonds trade at 15% yield, based on AFJ research, and have a non-call option at year five. United's 7% bond carry a non-call option at year three.
The structure includes a $1 billion first-priority lien on the American Airlines’ brand, related trademarks and domain names and a second-priority lien on the airline’s owned airport slots at Ronald Reagan Washington National airport and LaGuardia. It also includes a $200 million first-priority lien on the slot collateral.
“The novel structure in the airline industry leverages IP as the sole first-lien collateral, validating IP as a valuable collateral pool for other investors and providing the company with significant operational and financial flexibility to navigate the challenging industry environment,” says Goldman Sachs.
The deal also diversifies funding at a crucial time, “allowing American to monetise valuable collateral without relying on a broad syndication and minimising the need for more traditionally acceptable forms of collateral.”
Goldman Sachs acted as sole placement agent and bookrunner for the $1.2 billion investment by MBD. It is also the joint lead bookrunner for the airline’s $2.5 billion senior secured notes offering and lead left bookrunner and syndicate trading manager for its $2.15 billion dual-tranche common equity and convertible offering. Both of those deals closed in June.