Note: Currency is in Canadian dollars unless otherwise noted.
MONTREAL, July 29 /CNW Telbec/ - Air Canada today announced that it has
entered into arrangements to raise a total of CAD $1.02 billion in additional
liquidity through a series of financings and other transactions with certain
lenders and key stakeholders.
"By any measure, raising $1 billion in new liquidity is a tremendous
achievement, particularly in view of current credit markets and the state of
the airline industry," said Calin Rovinescu, President and Chief Executive
Officer. "This positive outcome was the result of the determined efforts of
our leadership team and support of our key stakeholders, including our
employees, retirees, unions, major shareholder, key aircraft lessors and
suppliers, loyalty partner and others. With these financings and other
transactions, the pension funding moratorium and new pension deficit funding
arrangements, as well as the 21-month extensions to our collective agreements
on a cost neutral basis, we have strengthened our position to manage through
this extremely difficult period for the airline industry.
"IATA forecasts 2009 losses in the airline industry of over $10 billion.
With ongoing global economic weakness and significantly lower airline
revenues, we still have much work to do to adapt to the profound impact of
this recession. The $1 billion of new liquidity will give us breathing room
towards achieving sustainable profitability. This will require a fundamental
repositioning of the airline with a focus on both cost management and a new
approach to revenue generation to offset the dramatic erosion in yield. I am
confident in our ability to meet the challenges ahead."
Financings and Capital Contributions
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On July 29, 2009, Air Canada entered into a financing agreement with GE
Canada Finance Holding Company, Export Development Canada, Aeroplan Canada
Inc., and ACE Aviation Holdings Inc. as lenders. GE Finance is acting as
Administrative Agent and GE Capital Markets Inc. and GE Capital Markets
(Canada) Ltd. are acting as arrangers. The secured financing extends a term
credit facility of up to $700 million (the Credit Agreement) on commercial
terms to Air Canada for the purpose of refinancing certain debt and to provide
funding for working capital and other general corporate purposes.
An initial drawdown of $600 million is available to Air Canada under the
Credit Agreement upon satisfaction of certain conditions. On or before the
first anniversary and subject to satisfaction of certain conditions, Air
Canada may request the increase of the facility by up to an additional $100
million by obtaining new commitments. Amounts drawn under the Credit Agreement
bear interest at a minimum annual rate of 12.75 percent.
The initial $600 million to be drawn under the Credit Agreement is
repayable, starting August 1, 2010, in equal consecutive quarterly
installments of $30 million with a final payment of $120 million due by the
fifth anniversary of the initial drawdown. Any increase to the facility would
increase, on a pro rata basis, the scheduled repayments, including the final
payment.
Air Canada's obligations under the Credit Agreement are secured by a
security interest and hypothec over substantially all of the present and
after-acquired property of Air Canada and its subsidiaries. The Credit
Agreement is subject to customary commercial terms and conditions, including
certain financial covenants requiring Air Canada to maintain minimum liquidity
and a fixed charge coverage test.
As part of the transactions under the Credit Agreement, Air Canada will
issue to the lenders, concurrently with the first drawdown, warrants for the
purchase of Air Canada's Class A variable voting shares or Class B voting
shares representing an aggregate of five percent of the total issued and
outstanding shares, to be allocated among the lenders based on their pro rata
lending commitments under the Credit Agreement. Subject to the terms of the
Credit Agreement, in the event that Air Canada does not grant additional
security over certain assets within 90 days of closing, Air Canada would be
required to issue to the lenders additional warrants representing up to an
additional five percent of the total issued and outstanding shares (determined
at the time of issuance of such additional warrants).
Air Canada has also obtained an extension of the repayment date under a
previous US $75 million (CAD $82 million) secured loan, now due in December
2013 (previously due December 2009).
In addition, Air Canada has concluded an agreement with a supplier,
conditional among other things, on completion and funding of the Credit
Agreement, which will provide Air Canada with a payment of approximately $220
million, in consideration of various contractual commitments.
Amended Credit Card Processor Agreement
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Air Canada has entered into further amendments to its agreements with one
of its principal credit card processors. Subject to certain conditions, the
amendments reduce the amount of cash deposits and security to be held by the
credit card processor, return deposits to Air Canada when the unrestricted
cash threshold increases to $1.1 billion from $800 million and thereafter
limit Air Canada's obligation to post certain defined amounts of security in
the event that unrestricted cash is below $1.1 billion but above $800 million.
Pursuant to the terms of its agreements, Air Canada's unrestricted cash
requirement increases from $800 million to $1.1 billion should Air Canada
maintain unrestricted cash of more than $1.2 billion for two consecutive
months.
Boeing 777 Sale Leaseback Agreement
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Air Canada has entered into a memorandum of understanding with GE Capital
Aviation Services ("GECAS"), for the sale and leaseback of three Boeing
777-300ER aircraft which, after payment of the sale price and subject to the
rights of the aircraft debt holders, will provide Air Canada with incremental
liquidity of approximately $122 million. The 12-year sale and leaseback
transactions are expected to be concluded prior to September 30, 2009 subject
to the completion of final documents and third party consents.
Amended Boeing 787 Purchase Agreement
-------------------------------------
Air Canada and Boeing have agreed to amend the Boeing 787 Dreamliner
purchase agreement to reduce the number of options for additional Boeing 787
aircraft by ten, from 23 to 13, and to provide for purchase rights for ten
Boeing 787 aircraft. Air Canada continues to have 37 firm orders for Boeing
787 aircraft. Air Canada and Boeing also agreed to amend certain commercial
terms, including to revise delivery dates and to provide for certain financial
adjustments. Air Canada's first Boeing 787 aircraft, is now scheduled for
delivery in the second half of 2013.
Repayment of Existing Credit Facilities
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Immediately prior to draw down under the Credit Agreement, Canadian
Imperial Bank of Commerce will assign to the new lenders under the facility
all of its right, title and interest in its secured credit facility with Air
Canada. Air Canada will also terminate its revolving loan agreement with
Aeroplan Canada Inc. and its secured engine facility for 22 engines. The
aggregate principal amounts outstanding repaid by Air Canada as a result of
the termination of these facilities is $117 million.
Seabury Group LLC acted as principal financial advisor to Air Canada on
these financings and other transactions.
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