Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

TransDigm Doubles Debt Sale as Junk Issuance Plummets

TransDigm Group Inc., the aircraft- components manufacturer that’s buying rival supplier McKechnie Aerospace Holdings Inc., almost doubled the size of its debt offering even as speculative-grade issuance drops.

The company today sold $1.55 billion of senior subordinated notes due 2018, up from $780 million marketed earlier, according to data compiled by Bloomberg. Proceeds from the offering and a term loan boosted to $1.55 billion will help finance the acquisition of McKechnie, refinance debt and add cash to the Cleveland-based company’s balance sheet.

TransDigm was able take advantage of investor demand and increase the amount of its borrowings even as junk bonds and leveraged loans drop from near 2010 highs on Nov. 9 amid concern that Ireland’s debt crisis will spread across Europe and lead to a reduction in risk appetite. High-yield, high-risk bond issuance has declined from $11.6 billion for the week ended Nov. 12 to $1.56 billion last week, and has totaled $240 million this week, Bloomberg data show.

“It’s a business that’s got good cash flow, and that’s part of the reason there was still a lot of strong demand,” said Terrence Dwyer, an analyst with KDP Investment Advisors Inc. in Montpelier, Vermont. “It has terrific operating margins.”

Junk bonds lost 2.08 percent since year-to-date returns peaked Nov. 9, according to Bank of America Merrill Lynch’s US High Yield Master II Index, while the S&P/LSTA U.S. Leveraged Loan 100 Index declined 0.87 percent from near its 2010 peak.

High-risk, high-yield debt is rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.

Ireland Aid

Ireland’s decision to request emergency aid from the European Union and the International Monetary Fund lessened the volume of speculative-grade offerings in recent weeks, according to Chris Towle, a portfolio manager at Lord Abbett & Co. in Jersey City, New Jersey.

“You had an overhang of ‘should I or should I not be worried by European sovereigns, should I reduce risk based on European headlines,’” said Towle. “Those who were skeptical about Greece and ignored the risk faced a correction in May, so people were wondering if investors would reduce risk appetite again.”

TransDigm said Sept. 27 that it agreed to purchase McKechnie of Irvine, California for $1.27 billion. The company initially sought to raise $1.98 billion in bonds and loans, which was increased to $3.4 billion yesterday, TransDigm said in a regulatory filing today.

Transdigm Rates

Transdigm’s 7.75 percent notes pay 526 basis points more than similar security Treasuries, according to data compiled by Bloomberg.

Credit Suisse Group AG and UBS AG are arranging the $1.55 billion term loan with an interest rate 3.5 percentage points more than the London interbank offered rate.

The company previously sought a $900 million term loan with a margin of 3.75 percentage points to 4 percentage points more than Libor, the rate banks charge to lend to each other. The lending benchmark has a 1.5 percent floor, which is unchanged.

Transdigm will issue the loan at a discount of 99.5 cents on the dollar. The so-called original-issue discount, which reduces proceeds for the borrower and boosts the yield for investors, was previously set at 99 cents.

“They are about 6.1 times leveraged now, they have a considerable amount of debt relative to their ability to service it through cash flow, and the higher that ratio is, the harder it will be for them to service that debt,” KDP’s Dwyer said today in a telephone interview.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.