April 13 - Air Canada announced that it has entered into a series of debt and equity financing agreements with the Government of Canada, which will allow Air Canada to access up to $5.879 billion in liquidity through the Large Employer Emergency Financing Facility (LEEFF) program.

 

The financial package provides for fully repayable loans that Air Canada would only draw down as required, as well as an equity investment, and is comprised of:

• Gross proceeds of $500 million for Air Canada shares at a price of $23.1793 per share
• $1.5 billion in the form of a secured revolving credit facility at a 1.5% premium to the Canadian Dollar Offered Rate (CDOR); the facility is secured on a first lien basis by the assets of Aeroplan Inc., Air Canada’s shares in Aeroplan as well as certain assets of Air Canada, including certain intellectual property relating to the Aeroplan loyalty program
• $2.475 billion in the form of three unsecured non-revolving credit facilities of $825 million each with: the first, five-year tranche at a 1.75% premium to CDOR per annum; the second, six-year tranche at 6.5% per annum (increasing to 7.5% after 5 years); and the third, seven-year tranche at 8.5% per annum (increasing to 9.5% after 5 years)
• As part of the financial package, Air Canada issued an aggregate of 14,576,564 warrants exercisable for the purchase of an equal number of Air Canada shares, subject to customary adjustments, at a price of $27.2698 per share during a 10-year term, representing 10% of the total commitment available under the above secured and unsecured credit facilities; 50% of the warrants vested concurrently with the implementation of the credit facilities and the remaining 50% of the warrants will vest on a proportional basis to the amounts that Air Canada may draw under the above unsecured credit facilities
• Up to approximately $1.4 billion in the form of an unsecured credit facility tranche to support customer refunds of non-refundable tickets. The facility will have a seven-year term and carry an annual interest rate of 1.211%

 

As part of the financial package, Air Canada has agreed to a number of commitments related to customer refunds, service to regional communities, restrictions on the use of the funds provided, employment and capital expenditures.

 

These include:

• Beginning April 13, 2021, offering eligible customers who purchased non-refundable fares but did not travel due to COVID-19 since February 2020, the option of a refund to the original form of payment. In support of its travel agency partners, Air Canada will not retract agency sales commissions on refunded fares
• The resumption of service or access to Air Canada’s network for nearly all regional communities where service was suspended because of COVID-19’s impact on travel, through direct services or new interline agreements with third party regional carriers
• Restricting certain expenditures, and restricting dividends, share buybacks and senior executive compensation
• Obligations to maintain employment at levels which are no lower than those at April 1, 2021
• The completion of the airline’s acquisition of 33 Airbus A220 aircraft, manufactured at Airbus’ Mirabel, Quebec facility. Air Canada has also agreed to complete its existing firm order of 40 Boeing 737 Max aircraft. Completion of these orders remains subject to the terms and conditions of the applicable purchase agreements

 

In connection with the Government’s equity investment, Air Canada has agreed to provide customary registration rights. The Air Canada shares and warrants issued to the Government are subject to certain transfer restrictions as well as an exercise cap which limits the Government’s aggregate voting rights from the shares acquired pursuant to this investment (including upon any exercise of the warrants) to 19.99%.

 

 

---

More Travel News:

Can Transat survive without Air Canada? “The short answer is yes,” says aviation expert
An interview with ACTA President Wendy Paradis
The Riviera Nayarit reinforces its air connectivity
Porter Airlines releases new tentative date for restarting flights