Air Lease Prices New Preferred Issue

Air Lease Corporation (NYSE:AL) has priced their new fixed-to-floating rate preferred with a starting fixed rate of 6.15%. The rate will trade at 3 month Libor plus a spread of 3.65% beginning in 2024.

From my perspective this is ridiculously low for an issue that is also non cumulative.

Of course we are pretty conservative, but anyone older than 30 knows that when the economy heads south (someday-who knows when) that airlines and those that lend to them are at the front of the line for problems.

The pricing term sheet can be seen here.

Regardless of what I think there no doubt will be plenty of demand for the issue.

The issue is rated BB+ by S&P and BB+ by Fitch.

7 thoughts on “Air Lease Prices New Preferred Issue”

  1. Dave, I don’t think the company is BB+ rated. I believe the company is BBB rated, and they do have sr notes rated at BBB. This preferred issued however is rated at BB+

  2. Like many others I too have some serious concerns as a long term hold. It is speculation what the value of the preferred will be 5 years from now.
    a) LIBOR may be obsolete before 2024. Its replacement for LIBOR has not been defined as of yet. Please note 424B5 preliminary prospectus, page S-23, “3 month LIBOR”, (iii) as to use of a substitute.
    b) In 2024 the risk premium over the 3 month LIBOR or its substitute will be determined by the market based upon the credit worthiness of Air Lease and general market conditions. If it is less than 365 basis points and the preferred is trading at a premium Air Lease may have an incentive to redeem the preferred at par. If, on the other hand, the risk premium is greater than 365 basis points and the market value is under par, the preferred stock holder will have a loss. The holder will be the loser.
    c) I completely agree with Tim that subordinate financing with a BB+ company this far along in the economic cycle in the strongly cycle airline industry with non-cumulative terms is not prudent. Not a good idea.
    d) I also agree with Gridbird that there are better opportunities in the market.
    My lane is for utes and others that will be just fine during the next economic downturn.
    – Dave

  3. Question—is this non-cumulative because it is considered a financial/insurance company?

    1. Eugene, at the top the the comments section and below the title, see greyed out “Newer Comments” or “Recent Comments” (cannot recall which). Tap on that and the most recent comments will populate the page.

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