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Gogo Inc (GOGO) Prices 12.50% Senior Notes worth $525M

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In-flight wireless services provider Gogo Inc. (GOGO - Free Report) recently priced 12.50% Senior Notes with an aggregate principal amount of $525 million. The notes are set to mature in 2022. We remind investors that this is the second time that the company has issued such bonds. Two weeks ago, the company halted the sale of similar notes. As a result, it has increased the coupon rate by 50 basis points to 12.50% for the current issue.

Note Details and Utilization

The notes will be co-issued by Gogo’s directly wholly owned subsidiary, Gogo Intermediate Holdings LLC and its indirect wholly owned subsidiary, Gogo Finance Co. Gogo Inc will act as a guarantor for the notes on a senior secured basis. The offering is expected to close on Jun 14, subject to customary closing conditions. The offering will be exempt from the registered requirements of the U.S. Securities Act of 1933 and will be made as a private offering, available only to qualified institutional investors.

Net proceeds from this offering will be used to repay Gogo’s outstanding debt under its senior term credit facility. The company intends to use the remaining amount for capital and general corporate purposes. A portion of the proceeds may also be used to finance the launch and commercial roll-out of the company’s next generation technology solutions, namely the satellite-based 2Ku system.

GOGO INC Cash from Financing (Quarterly)

GOGO INC Cash from Financing (Quarterly) | GOGO INC Quote

The Bottom Line

 

Presently, the company provides services via its ground-based network, which makes it impossible to connect to every passenger onboard. This operational hindrance has made American Airlines Group Inc. (AAL - Free Report) , one of Gogo’s major customers, to split contract orders between Gogo and its rival, ViaSat Inc. (VSAT - Free Report) , for providing WiFi services to American Airlines’ new 737 MAX fleet, manufactured by The Boeing Company (BA - Free Report) . However, with additional financing in the bag through the bond issue, Gogo will be able to install the next-generation satellite-based system which will help bolster its revenues, going forward.

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