MONTREAL, Aug. 28, 2013 /CNW Telbec/ - ACE Aviation Holdings Inc. (ACE)
announced today its results for the second quarter of 2013 and provided
an update with respect to its liquidation process.
Second Quarter 2013 Results
In the second quarter of 2013, ACE recorded an increase in net assets in
liquidation of $0.1 million due to interest income earned during the
quarter offset by administrative and other expenses.
As at August 27, 2013, ACE's only remaining assets consist of cash and
short-term investments in an aggregate amount of $132 million.
Liquidation Process Update
On June 28, 2012, further to the approval by ACE shareholders on April
25, 2012 of a special resolution providing for the voluntary
liquidation of ACE, the Superior Court of Québec (Commercial Division)
(the "Court") issued an order appointing Ernst & Young Inc. as liquidator of ACE
(the "Liquidator"). Effective as of June 28, 2012, all of the directors and officers of
ACE have resigned from their positions and the Liquidator was vested
with the powers of the directors of ACE.
Pursuant to an order issued by the Court on February 25, 2013, the
Liquidator established a process for the identification, resolution and
barring of claims and other contingent liabilities against ACE.
Creditors had until May 13, 2013 to file their proof of claims, failing
which their claims would be barred and extinguished.
As previously disclosed, in connection with the process leading to the
issuance of tax clearance certificates in favour of ACE for all
taxation years ended on or prior to December 31, 2010, Revenu Québec
conducted a sales tax audit of ACE and its subsidiaries in 2010 and
2011. Revenu Québec issued notices of reassessment in the amount of
$37.7 million primarily with respect to certain importations of
aircraft parts on the basis that it was Air Canada, and not ACE's
subsidiary ACTS LP, which should have paid GST and should have been
allowed to claim the related refund. Revenu Québec also issued
additional notices of reassessment in the amount of $7.4 million
relating, inter alia, to certain intercompany transactions on which
Revenu Québec considers that ACE or ACTS LP should have charged Air
Canada sales tax in the amount of $6.8 million. All such reassessments
were paid by ACE and ACTS LP, and Air Canada paid an aggregate amount
of approximately $40.1 million to ACE and ACTS LP and then claimed
additional GST/QST refunds for the same amount. ACE agreed to indemnify
and hold harmless Air Canada should such refund claims be reassessed in
A substantially similar process occurred with respect to GST payable on
importation on behalf of Aveos and Aveos agreed to claim additional GST
refunds in the amount of $1.1 million and to pay such amount to ACE to
reimburse it for GST paid in connection with the importations. ACE
agreed to indemnify and hold harmless Aveos should such refund claims
be reassessed in the future.
In response to ACE's claims process, Air Canada filed a contingent claim
related to the tax indemnity referred to above. The contingent claim,
in the amount of $50.1 million, covers any eventual reassessment of Air
Canada's input tax credit refund claims plus any related interest and
ancillary legal costs. The reassessment periods for the large majority
of the input tax credit claims covered by the indemnity in favour of
Air Canada will expire by the end of 2014, with the remaining
reassessment periods gradually expiring by 2016. Aveos filed a similar
contingent claim in the amount of $1.6 million with respect to any
eventual reassessment of input tax credit refund claims and any related
interest and ancillary costs. ACE will maintain a reserve in the amount
of the Air Canada and Aveos claims which will not be available for
distribution to the shareholders pending the expiration of the related
reassessment periods or settlement of such contingencies.
ACE also received a claim from Teri Prince relating to a proposed class
action initiated by Ms. Prince against Air Canada and ACE Aviation
Holdings Inc., which alleges that Air Canada improperly charged Ms.
Prince and other class members for certain United States taxes in
connection with the sale of airfare. The plaintiff alleges (improperly
in ACE's view) that as the former parent or shareholder of Air Canada,
ACE is liable for the acts of Air Canada. Ms. Prince therefore filed a
proof of claim against ACE in the liquidation claims process in the
amount of $200 million, pending determination of the allegedly
overcharged amounts. No breakdown or calculation was provided in
relation to the amount claimed. ACE is of the view that this claim
against ACE has no merit given that ACE is a separate entity from Air
Canada and that ACE never sold airfare. Accordingly, the Liquidator has
delivered a notice of disallowance to Ms. Prince and it will take
appropriate measures to cause this claim to be disallowed and to have
ACE removed as a defendant in this class action. The Liquidator will
not proceed with any further distributions to shareholders pending
satisfactory resolution of this matter.
Future distributions of ACE's remaining net cash to its shareholders are
subject to the expiration or settlement of any contingencies and there
is no certainty as to the timing or amount of such distributions. The
final distribution to shareholders and the cancellation of the shares
of ACE will not occur until all remaining contingent liabilities are
settled or otherwise provided for.
For additional information with respect to the liquidation of ACE, refer
to the management proxy circular dated March 9, 2012 and the other
public filings of ACE which are available at www.sedar.com and www.aceaviation.com.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this news release may contain forward-looking
statements. Forward-looking statements may relate to analyses and other
information that are based on forecasts of future results and estimates
of amounts not yet determinable. These statements may involve, but are
not limited to, comments relating to strategies, expectations, planned
operations, future actions, the timing of the liquidation and
distributions to shareholders, the potential amount of ACE's
contingencies and liability under claims filed, the final distribution
to shareholders and the cancellation of the shares of ACE. These
forward-looking statements are identified by the use of terms and
phrases such as "anticipate", "believe", "could", "estimate", "expect",
"intend", "may", "plan", "predict", "project", "will", "would", and
similar terms and phrases, including references to assumptions.
Forward-looking statements, by their nature, are based on assumptions
and are subject to important risks and uncertainties. Any forecasts or
forward-looking predictions or statements cannot be relied upon due to,
amongst other things, changing external events and general
uncertainties of the business. Actual results may differ materially
from results indicated in forward-looking statements due to a number of
factors, including without limitation, market, regulatory developments
or proceedings, and litigation and actions by third parties as well as
the factors identified throughout ACE's filings with securities
regulators in Canada and, in particular, those identified in the Risk
Factors section of ACE's 2012 Annual MD&A and Second Quarter 2013 MD&A.
If ACE does not proceed with the winding-up in a timely manner, ACE
will continue to incur operating costs and fees. The forward-looking
statements contained in this news release represent ACE's expectations
as of the date they are made, and are subject to change after such
date. However, ACE disclaims any intention or obligation to update or
revise any forward-looking statements whether as a result of new
information, future events or otherwise, except as required under
applicable securities regulations.
SOURCE: ACE AVIATION HOLDINGS INC.
For further information:
Contact: David Saldanha, Ernst & Young Inc. (416) 943-4444