International Lease Finance Corp. (AIG), the aircraft lessor owned by American International Group Inc., set the interest rate on a $900 million term loan the company is seeking repay outstanding debt, according to a person with knowledge of the transaction.

The loan, due in five years, will pay 4 percentage points more than the London interbank offered rate, said the person, who declined to be identified because the terms are private. Libor, a rate banks say they can borrow in dollars from each other, will have a 1 percent floor.

ILFC is proposing to sell the debt at 99 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.

The debt is rated Ba3 by Moody’s Investors Service and graded BBB- by Standard & Poor’s.

Bank of America Corp. is arranging the financing for the Los Angeles-based company, the person said. The debt will be distributed to investors this afternoon with the deal expected to close Feb. 23.

Paul Thibeau, a spokesman for ILFC, didn’t immediately respond to an e-mail seeking comment.

In a revolving credit facility, money can be borrowed again once it’s repaid; in a term loan, it can’t.

Source: www.bloomberg.com