[Editor’s note: This updates Debtwire’s previous coverage of PHI’s syndication efforts. The update includes new reporting in paragraph two on efforts to enhance the collateral package. ]
PHI Inc is considering shifting funds from the bond deal to the loan portion of its proposed refinancing deal, according to buyside sources following the transaction. The helicopter transportation company is also considering floating wider price expectations and has pushed the timeline for execution to next week, said the sources.
In addition, PHI has been in discussions with key investor accounts regarding enhancing the collateral package underpinning the new offerings, said two of the sources. Initially, the company proposed pledging aircraft valued at USD 461.5m for the collateral backing the new term loan and bonds, out of the company’s total fleet, which is valued at approximately USD 857m. While the initial collateral package was primarily centered on aircraft used for oil and gas operations, a revised package is expected to include certain air medical helicopters that were left out of the initial package, the sources said.
In other expected modifications, PHI is looking to downsize its senior secured notes offering to USD 300m from USD 500m, shifting those funds into an upsized USD 300m term loan, said four of the buysiders.
Proceeds will be used to take out PHI’s USD 500m 5.25% senior unsecured notes due 2019, fully pay down and retire the existing revolver, and fund general corporate purposes. The financing includes a new USD 75m revolver.
The UBS-led bond deal, initially slated to price yesterday (20 June) is now expected to trail into early next week, said three buysiders. Whispers for the bond are now circulating in the 9.75% area, they said—having drifted north of 10% yesterday, before the borrower began considering downsizing the bond.
Price talk for the upsized USD 300m loan is Libor+ 700 bps, the buysiders added. The originally proposed USD 100m loan was intended to be privately placed with a direct lender, and the additional USD 200m is expected to be placed with one or two more direct lenders, said a holder of the company’s existing bonds.
The two facilities are expected to be pari passu. However, that could potentially change subject to ongoing discussions around collateral, said the bondholder. Buysiders looking at the bond offering had objected to the company’s air medical aircraft not being included in the collateral package, as Debtwire reported on Wednesday.
Investors have also expressed concern around the company’s high leverage and increased exposure to the deepwater and offshore oil and gas markets after its acquisition of HNZ Group’s offshore business.
PHI’s pro-forma leverage comes to 8.6x, based on USD 69.7m LTM combined adjusted EBITDA and USD 600m in total debt, according to deal documents. Taking out the adjustments for its recent acquisition of HNZ Group’s offshore business, the company’s LTM EBITDA through 31 March drops to USD 22.6m.
The company’s existing USD 500m 5.25% senior unsecured notes due 2019 last traded today at 97.813 to yield 8.416%, up two points from a print yesterday morning at 95 to yield 12.6%, according to MarketAxess.
PHI representatives did not respond to requests for comment. UBS declined to comment.