Gogo announced its long-awaited debt refinancing deal this afternoon, a move that should deliver huge savings for the company. The move allows the company to retire a billion dollars of high-interest debt, reducing both the total leverage and the rate paid.
With today’s announcement, we… are well-positioned to build on our enhanced financial profile and strong market position to drive long-term shareholder value.– Oakleigh Thorne, Gogo’s Chairman and CEO
A new 7-year, $725 million Term Loan B prices at LIBOR + 3.75%, with a 4.5% rate floor. An additional 5-year, $100 million revolving credit facility is also available, though the company does not anticipate drawing from it immediately.
With the smaller loan and lower rate the company expects a $70 million annual reduction in interest costs.
The closing of the Facilities, which is expected to occur in late April, is subject to execution of definitive documentation.
CFO Barry Rowan notes that demand for the placements is high, exceeding supply by a significant margin. Rowan continues, “This comprehensive refinancing will further the transformation of our financial profile, strengthening our capital structure, improving our cash flow and creating tremendous opportunity for Gogo to deliver on the full value-creation potential of our unmatched platform in the attractive Business Aviation market.”
Combined with the $400 million Intelsat paid for the Commercial Aviation side of the business, the $750 million from the new loan is sufficient to retire the legacy debt and leave some cash available for regular operations. As of April 20, 2021, Gogo had $464 million cash on hand. Following the closing of the Facilities, and subsequent payment of the outstanding principal amount of the Senior Secured Notes, redemption premium and accrued interest, and transaction fees and expenses, Gogo expects to have approximately $70 million of cash on its balance sheet.
The reduced debt is also significant in helping enable investment in the upcoming Gogo 5G next-generation ATG network. That effort recently slipped to a 2022 launch plan.
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