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FTAI Aviation Ltd. 8-K Report, Material Agreement (Apr 11, 2024)

Filed April 11, 2024For Securities:FTAIFTAIMFTAIN

Summary

FTAI Aviation Ltd. (FTAI) has announced the issuance of $700 million in 7.000% Senior Notes due 2031. This strategic debt issuance is primarily intended to fund the repurchase and redemption of the company's outstanding 6.50% Senior Notes due 2025. The net proceeds will cover the cash tender offer for the 2025 Notes, any remaining notes to be redeemed, and associated fees and expenses, with any residual funds allocated for general corporate purposes. This move signals a proactive approach by FTAI to manage its debt profile, extending its maturity runway and potentially refinancing at a higher interest rate but with a longer term. The new notes are senior unsecured obligations of the Issuer, guaranteed by FTAI Aviation Ltd., and rank equally with other senior unsecured debt. Investors should note the terms related to interest payments, redemption provisions (including make-whole premiums and change of control clauses), and the restrictive covenants outlined in the new indenture, which may impact future financial flexibility.

Key Highlights

  • 1FTAI Aviation Ltd. (as guarantor) and Fortress Transportation and Infrastructure Investors LLC (Issuer) issued $700 million of 7.000% Senior Notes due 2031.
  • 2The primary use of proceeds is to fund the tender offer and redemption of the company's $650 million outstanding 6.50% Senior Notes due 2025.
  • 3The new Notes bear interest at 7.000% per annum, payable semi-annually on May 1 and November 1.
  • 4The Notes are senior unsecured obligations and are fully and unconditionally guaranteed on a senior unsecured basis by FTAI Aviation Ltd.
  • 5Early redemption is possible with a 'make-whole' premium before May 1, 2027, after which redemption prices decline.
  • 6A 'Change of Control' event triggers a repurchase right for noteholders at 101% of the principal amount.
  • 7The new indenture includes restrictive covenants limiting the Issuer and restricted subsidiaries' ability to incur debt, encumber assets, and make restricted payments, among other actions.

Frequently Asked Questions

The primary purpose of issuing the new 7.000% Senior Notes due 2031 is to refinance the company's existing 6.50% Senior Notes due 2025. The proceeds will be used to fund a cash tender offer for these older notes and to redeem any remaining 2025 Notes that are not tendered, along with associated fees and expenses.

The 7.000% Senior Notes due 2031 are senior unsecured obligations of the Issuer. They rank equally in right of payment with all existing and future senior unsecured indebtedness of the Issuer. They are senior to any subordinated indebtedness and effectively subordinated to all secured obligations to the extent of the collateral securing those obligations. The Notes are also fully and unconditionally guaranteed on a senior unsecured basis by FTAI Aviation Ltd.

Key features include a 7.000% annual interest rate, semi-annual payments, and a maturity in May 2031. Investors should be aware of the redemption provisions, including the 'make-whole' premium for early redemption before May 2027 and declining redemption prices thereafter. A Change of Control event allows noteholders to require repurchase at 101% of principal. Risks include interest rate risk, credit risk of the Issuer and guarantor, and the fact that the Notes are unsecured, meaning they are subordinated to secured debt and structurally subordinated to liabilities of non-guaranteeing subsidiaries.

The restrictive covenants in the new indenture limit the ability of the Issuer and its restricted subsidiaries to engage in certain financial activities, such as incurring additional indebtedness, encumbering assets, making restricted payments (like dividends), and selling assets. These covenants are designed to protect the bondholders but can restrict the company's financial and operational flexibility for future growth, acquisitions, or other strategic initiatives.