Worldwide Flight Services sets talk on 3-part cross-border bond deal – LCDNews

Thomas Beeton

Price talk has been given as follows for the three-part secured bond offering from WFS Global SAS:

  • €340 million of five-year (non-call two-year) fixed-rate notes, at 6.5% area
  • €250 million of five-year (non-call one-year) floating-rate notes, at E+625 area with a 0% floor offered at par
  • $400 million of five-year (non-call two-year) fixed-rate notes, at 8% area

Talk comes comfortably inside initial price thoughts given Jan. 31 at 6.75%-7%, E+650 area and 8%-8.25% on each tranche, respectively. Books for the euro tranches close at 1:30 p.m. London time, while dollar books are set to close at 4 p.m. London time.

Pricing is on track for today via global coordinators Barclays (B&D) and Goldman Sachs. Barclays is sole physical bookrunner on the dollar tranche, and both banks are physical bookrunners on the euro tranches. BofA Securities, Citigroup, HSBC, ING, Morgan Stanley, MUFG and RBC Capital Markets are additional bookrunners.

The bonds — which will refinance existing debt and bolster cash balances — will be issued via Promontoria Holding 264 BV. Secured ratings are expected at B from S&P Global Ratings and B3 from Moody’s, both with stable outlooks, according to the banks. Moody’s in October 2021 reaffirmed the issuer’s Caa1 rating and upgraded the outlook to positive on the back of improved operational performance during the first half of 2021.

WFS says its 2021 revenue and EBITDA are up 1% and 4%, respectively, on pre-pandemic numbers, due to a 5.8% increase in cargo volume driven by e-commerce demand. The refinancing is being marketed off adjusted EBITDA of €182 million for the 12 months ended December 2021, which the company says will translate into secured leverage of 4.2x and total leverage of 5.3x.

Investors nevertheless need to weigh how sustainable these margins will be when shipping disruption abates and makes air cargo less attractive than it has been during the last year, Spread Research analysts note. “The group is still a small player in a fragmented market and customer concentration remains high,” the firm’s analyst notes. “Moreover, free cash flow generation has historically been negative due to poor profitability, high non-recurring costs and external factors such as the trade war between the U.S. and China.”

Feedback from investors has noted the positive tailwind provided by cargo volumes, although some have questioned why the company did not refinance the bonds earlier given that its outstanding debt has traded well since September after the company announced a new contract with SriLankan Airlines.

WFS has €400 million of fixed-rate bonds and €260 million of floating-rate notes which mature in 2023, both of which rose to face value mid-September after the announcement of the contract, which see Sri Lanka’s flagship carrier become WFS’ first new customer at its cargo-handling terminal at London Heathrow.

Both tranches were placed in 2018 to fund the acquisition of the company Cerberus from Platinum Equity and will be replaced as part of this week’s refinancing exercise, along with a €225 million bridge facility. The 6.75% fixed-rate bonds are callable at 101.688 in March, while the E+625 floaters are callable at par. A €160 million, 4.5-year super-senior secured revolving credit facility will complete the transaction.

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