International Lease Finance Corp. (AIG:US), the aircraft lessor owned by American International Group Inc., set the interest rate it will pay on a $550 million term loan it’s seeking to refinance debt, according to a person with knowledge of the transaction.
The debt will pay interest at 3.75 percentage points more than the London interbank offered rate, said the person, who declined to be identified because the terms are private. Libor, the rate banks say they can borrow in dollars from each other, will have a 1 percent floor.
ILFC is proposing to sell the loan at 99.5 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.
Lenders are being offered one-year soft-call protection of 101 cents, meaning the company would have to pay 1 cent more than face value to refinance the debt during the first year, the person said.
Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc. are arranging the financing for the Los Angeles-based company, and investors have until April 3 at noon in New York to submit commitments, according to the person. The deal is expected to close and fund the week of April 9.
ILFC’s existing term loan due in March 2016 pays interest at 5 percentage points more than Libor with a 2 percent minimum on the benchmark, according to data compiled by Bloomberg. The debt was sold to investors at 98 cents on the dollar, the data show.
Paul Thibeau, a spokesman for ILFC, declined to comment.
In a revolving credit facility, money can be borrowed again once it’s repaid; in a term loan it can’t.
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