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Gogo Grounds Its Bond Deal

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Bart King
May 26, 2016 19:44

In-flight Internet provider Gogo Inc. GOGO 16.35 % took the rare step of canceling a bond sale days after it agreed to terms, saying it was in negotiations with an airline it didn t identify about serving a large portion of its fleet.

The six-year bond had carried a low, or junk, credit rating and a 12% interest rate, an attractive rate when compared with 10-year U.S. Treasurys, which are yielding under 2%.

Some investors speculated the potential airline deal would improve the company s finances and could help Gogo lower its interest rate when it tries to sell the debt again.

But Gogo s move was unusual because the company had announced what was considered positive news.

American can decide to terminate its agreement with Gogo for those planes if it deems Gogo s offer less favorable than the competitor, the prospectus said.

The market viewed this news that came out in February about Gogo being in some sort of dispute with American as existential, and I think now it s starting to understand there s a lot of battles to be fought in this area, said Matthew Robison, senior analyst at Wunderlich Securities.

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Bart King
May 26, 2016 19:44
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