Giant Aircraft Lessor Air Lease Corp to Sell Preferred Issue

Aircraft lessor Air Lease Corp (NYSE:AL) will sell a new preferred stock offering of fixed-to-floating rate preferred stock.

AL has aircraft with current book values of about $16 billion being leased to airlines across the globe.

While aircraft leasing can be a lucrative business when global economies are strong it can be the inverse if we go into a global recession and airlines begin to experience pressure on their revenues and balance sheets. As with many similar types of businesses Air Lease is highly leveraged–they carry debt of almost $12 billion against equity of $5 billion.

The company currently pays a 13 cent/share quarterly dividend.

This issue will be non-cumulative, but should be qualified for preferential tax treatment. The rate will be fixed until 2024 after which it will float with a 3 month Libor spread.

Preliminary information can be found here.

12 thoughts on “Giant Aircraft Lessor Air Lease Corp to Sell Preferred Issue”

  1. Off the top, I asked about the new Preferred from a closed end mutual fund, the Priority Income Fund. Thanks, John

  2. Tim, around 1 hour plus before market close, I made a post on your Priority Income Fund preferred at your other thread. This has been trading with small volume, 30,155 shares per Fidelity Active Trade PRO. Today, it closed at $24.90. Looks like it sold around 80,000 shares on Monday. The temporary symbol, recognized by FIDO and Schwab is PRNCP. Will appreciate learning your thoughts and others. A closed end mutual fund. The only info I got via google is Bloomberg News:

    https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=214922783

    Thanks and regards,

    John

    Link to my post:
    https://innovativeincomeinvestor.com/priority-income-fund-to-try-again-to-sell-term-preferred-issue/

  3. Two credit notches below the bonds and 200 bips above the recently issued 2024 bonds. A reasonable proposition but a pass for me. Better things will come.

    A bone to retail investors; they don’t do retail very often.

    What is the Egan Jones rating?

    1. likely pass also. Reset floating rate is priced good for BB+ but 6.15% for fixed is priced as investment grade. So it would need to trade down at discount. Schwab has common stock at outperform. 3 analysts at etrade (tipranks) have strong buy on common stock

      1. SteveA–for something non cumulative at the rating it is at 6.15% is simply silly. They must be in a recreational marijuana state,.

        1. Agree with you. A poor offering, at 23-24 a share I might nibble for 25% share for a trade but even then it’s a big maybe

        2. Lets see, I can throw bones at a highly cyclical and everybodys favorite investing sector of airlines for a non cum 6.15%, or I can buy 6.70% cum, 20% below par BBB- from Enbridge that has paid a common stock divi for 64 years in a row…Decisions decisions….

        3. Tim I live in a recreational marijuana state. I’m too old to smoke pot but think I’m hallucinating when reading the recent offerings. Most of the pot smokers are just laughing and eating Doritos so it’s very hard to tell how many of them will be buyers.

  4. From Fitch

    “Air Lease’s debt to tangible common equity ratio was 2.4x at Dec. 31, 2018, and expected to improve modestly to 2.3x pro forma for the preferred share issuance. This is below management’s articulated target of 2.5x longer-term, which remains among the lowest of pure-play aircraft lessors rated by Fitch. As a secondary leverage metric, Fitch also considers Air Lease’s leverage on a consolidated basis, inclusive of co-investment joint ventures with Napier Park (Blackbird Capital). Given the currently small size and modest leverage of this platform, the impact on consolidated leverage is not material.”

    1. Float will be Libor + 3.65%

      Dividend Rate (Non-Cumulative): At a rate per annum on the stated amount of $25.00 per share of the Series A Preferred Stock equal to (i)
      6.150% from March 5, 2019 to, but excluding, March 15, 2024, and (ii) the three-month LIBOR (as defined
      in the Preliminary Prospectus Supplement) on the related dividend determination date (as defined in the
      Preliminary Prospectus Supplement) plus 3.650% per annum from and including March 15, 2024, reset
      quarterly, in each case, only when, as and if declared.
      Dividend Payment Dates: If declared, March 15, June 15, September 15 and December 15 of each year, commencing on June 15,
      2019.

  5. 6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual
    Preferred Stock, Series A (the “Series A Preferred Stock”)
    Expected Security Ratings*: Standard & Poor’s Rating Services: BB+
    Fitch Ratings: BB+
    Kroll Bond Rating Agency: BBB

    1. Thanks George–if I didn’t see it in black and white I would think this was in error.

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