American Airlines boosts junk bond again to $2.5 billion

American Airlines Group Inc. increased its junk bond offering for a second time raising it to $2.5 billion from $2 billion earlier, according to people familiar with the matter.

The secured five-year junk bond is being marketed with a coupon of 11.75% and a discounted price of 99 cents on the dollar, which comes to an all-in yield of 12.01%, according to the people, who asked not to be identified because the deal is private. Early pricing discussions on the deal had been in the 12% area.

The sales process closed at 3:45 p.m. in New York. The deal was originally expected to be about $1.5 billion in size but was increased to $2 billion after canceling a leveraged loan sale.

The nixed $500 million loan had been marketed at 950 basis points over the London interbank offered rate benchmark and a discounted price of 95 to 96 cents on the dollar. That translated to an all-in yield of around 11%, according to Bloomberg calculations.

Representatives for American and Citigroup Inc., which is leading the offering, declined to comment.

Read more: American Air dangles 12% bond yield in $3.5 billion cash hunt

Proceeds from the bond offering will refinance a $1 billion 364-day term loan the company raised from banks in March, and bolster liquidity. The debt is part of a larger financing package that also raised about $1 billion in a share sale and $1 billion in new convertible bonds, both of which were increased from planned offerings of $750 million each.

The airline earlier in the morning had received just over $3 billion in orders for the secured bond offering, which is backed by assets like airport slots and gates. Of that, about $2.5 billion was arranged before the deal began formally marketing on Monday, two of the people said.