AAR Prices $1.915 Billion in Notes to Finance MRO Holdings Acquisition
Key Facts
AAR priced a $1.915 billion aggregate offering of senior notes on November 2, comprising a $955 million tranche due in 2031 and a $960 million tranche due in 2034, according to a company statement. The company intends to use the net proceeds, together with proceeds from a private stock placement and borrowings under its revolving credit facility, to pay the cash consideration for the acquisition of a controlling stake in MRO Holdings. The proceeds will also be used to refinance MRO’s existing debt and fund transaction expenses, working capital and general corporate purposes. The offering is therefore directly tied to financing the deal and restructuring the target company’s debt, rather than providing funds for unspecified general use. The offering is expected to close on November 17, subject to customary closing conditions.
The 2031 tranche carries a fixed annual interest rate of 7.125% and matures on November 15, 2031, while the 2034 tranche carries a fixed rate of 7.375% and matures on November 15, 2034, according to AAR. These rates set the disclosed interest cost for each tranche, with the debt spread across more than one maturity date. The financing follows a deal announced by the company on September 28 to acquire a controlling 65% stake in MRO Holdings. AAR valued the deal’s implied enterprise value at $4.0 billion and said it expects to complete it during the third fiscal quarter ending in February 2027, after receiving regulatory approvals and satisfying customary closing conditions. The notes’ different maturities spread the deal’s financing across two separate obligations.
AAR will issue shares at an agreed value of approximately $780.8 million as part of the acquisition consideration, alongside the use of note proceeds and borrowings under the revolving facility. The financing structure announced by the company included approximately $2.1 billion of new debt, shares valued at approximately $780 million to be issued to current MRO shareholders at $135 per share, and proceeds of approximately $230 million from a private placement. AAR will allocate part of the note proceeds to fund an intercompany loan to MRO Holdings, which the company will use to refinance all outstanding debt under its current credit agreement. Other uses include transaction expenses, working capital and general corporate purposes. These provisions add a separate route for refinancing MRO’s debt alongside payment of the cash consideration for the acquired stake.
AAR amended its revolving credit facility in October, increasing total commitments to $1.375 billion, up $550 million from the previous level of $825 million, and extending the maturity date from December 2027 to October 2031. The company said the amendment facilitates the financing of the MRO Holdings acquisition. The amendment took effect on October 23 and raised the maximum permitted financial covenant leverage ratio to 5.50x, with subsequent step-downs. The company’s filing said the facility is not contingent on completion of the acquisition. Before that, AAR’s net debt was approximately $780.5 million and its net leverage was 1.81x as of August 31, 2026.
AAR expects net leverage to be approximately 3.6x upon completion of the MRO deal, including run-rate annual cost savings, then targets reducing it to about 3.0x within two years of closing and to a range of 2.0–2.5x over the medium term. In the company’s estimates, MRO Holdings is expected to generate approximately $1 billion in calendar 2026 sales and $285 million in adjusted EBITDA, at a margin of approximately 27%. AAR also forecast that the deal would lift the combined adjusted EBITDA margin from approximately 12% to 16% before cost savings, and updated its target to approximately 19–20% within three to four years. The company said the deal would be accretive to adjusted earnings per share in the first full fiscal year after closing. The transaction gives AAR the option to acquire the remaining 35% of MRO Holdings under an exercise schedule extending beyond the initial closing.
AAR expects to complete the acquisition of the controlling stake in the third fiscal quarter ending in February 2027, while the notes offering is expected to close on November 17, 2026, placing the financing and acquisition milestones in successive stages. If the notes offering closes before the acquisition is completed, the company will deposit the gross proceeds into a separate escrow account. Each series of notes is subject to a special mandatory redemption if the escrow closing conditions are not met. After the acquisition is completed and the proceeds are released, AAR’s domestic wholly owned subsidiaries will guarantee the notes jointly and severally, subject to specified exceptions. The offering remains subject to customary closing conditions, while the transaction is subject to regulatory approvals and its closing conditions.