AIR Completes Sale of Notes

Recently, AAR Corp. (AIR - Analyst Report) announced completion of its previously announced sale of $175,000,000 of its 7.25% senior unsecured notes due 2022.  The Notes were sold at a price equal to 98.268% of the principal amount, for a yield to maturity of 7.50%.  

The company has planned to use the proceeds of the offering to repay a portion of the borrowings incurred under the revolving credit agreement toward purchase of Telair International and Nordisk Aviation, back on December 2, 2011. The proceeds are expected to pay fees and expenses of the offering as well.

The Notes are senior obligations of AAR Corp.; guaranteed by the company’s existing domestic subsidiaries. The company ,which operates in a highly capital intensive industry, is highly dependant on the continuing availability of debt and equity capital. In such a scenario, regular issuance of secured, unsecured notes by the company--representing its ability to finance the debt liabilities on favorable terms, appear impressive.

Earlier this month, the company declared a quarterly cash dividend of $0.075 per share to its stockholders. The dividend will be paid on February 13, 2012 to stockholders of record as of the close of business on January 30, 2012.

AAR Corp. is a leading provider of products and value-added services to the worldwide aerospace and government and defense industries.  With facilities and sales locations around the world, AAR uses its close-to-the-customer business model to serve customers through four operating segments: Aviation Supply Chain; Government and Defense Services; Maintenance, Repair and Overhaul; and Structures and Systems.

Over time, the company has been winning a number of significant contracts for providing value-added solutions to the U.S. army and navy. In addition, the company is offering defense and nation building initiatives of other foreign governments. We believe that the company’s market expertise, technical and financial capabilities will provide it with a strong competitive advantage; and its commitment toward returning shareholder value will help maintain a satisfactory position in the industry.

The company competes directly with its peers such as Goodrich Corp (GR - Analyst Report), Boeing Co (BA - Analyst Report), Lockheed Martin Corporation (LMT - Analyst Report).  We currently hold a Neutral recommendation on the stock. AIR has a Zacks #3 Rank, implying a short-term (1-3 months) Hold rating.

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