- Reduction of outstanding indebtedness by approximately C$355 million
- Extension of maturities of senior secured debt to 2023
- Annualized interest expense savings of approximately C$60 million
- Increase in unencumbered assets by C$650 million to approximately C$2 billion
MONTREAL, Oct. 6, 2016 /CNW Telbec/ - Air Canada announced today that it has completed its previously announced private offering of C$200 million of 4.75% senior secured first lien notes due 2023 (the "2016 Senior Notes") and the closing of its previously announced U.S.$1.1 billion new senior secured credit facility, comprised of a U.S.$800 million term loan maturing in 2023, together with a new, undrawn U.S.$300 million revolving credit facility expiring in 2021 (collectively with the term loan, the "2016 Credit Facility"). The 2016 Credit Facility has an initial interest rate of 275 basis points over LIBOR (subject to a LIBOR floor of 75 basis points).
Air Canada received aggregate net proceeds of approximately C$1.23 billion from the sale of the 2016 Senior Notes and from the term loan under the 2016 Credit Facility (in each case, after deduction of the applicable transaction costs, fees and expenses). Air Canada applied the net proceeds, together with approximately C$444 million of cash on hand, to redeem all of Air Canada's outstanding senior secured notes due 2019 and 2020, and to repay Air Canada's outstanding U.S.$300 million secured term loan. In conjunction with such repayment and redemption, C$61 million in premium costs were paid, and a write off of transaction costs and discounts of $C21 million was recorded, both of which will be reported as an interest charge in 2016. Air Canada's 7.750% senior unsecured notes due 2021 were not called for redemption and remain outstanding.
"This transaction achieved several key objectives and represents a meaningful improvement to our balance sheet. Since the end of the second quarter of 2013, we have reduced the weighted average cost of our overall debt by approximately 150 basis points, to 4.49 per cent. This transaction also extends the maturities of our senior secured debt to 2023. We now have even greater flexibility to continue to execute on our strategic initiatives and create additional value for shareholders," said Calin Rovinescu, President and Chief Executive Officer.
"We expect to realize annualized interest expense savings of approximately C$60 million. We have also freed up collateral with a value of approximately C$650 million, bringing the total estimated value of Air Canada's unencumbered assets to approximately C$2 billion. We also added U.S.$90 million in capacity to our revolving credit facility, up to U.S.$300 million," concluded Mr. Rovinescu.
Other than the principal amount of the 2016 Senior Notes and amounts relating to the redemption of its Canadian dollar senior secured notes, Canadian dollar figures identified in this news release are generally based on an exchange rate of C$1.00 equal to U.S.$0.7596. Air Canada's outstanding indebtedness, weighted average cost of debt and interest expense are dependent on a number of factors, risks and uncertainties, including fluctuations in interest rates and the Canada-U.S. dollar exchange rate, both of which have varied significantly over the last several years and may continue to fluctuate. Please see section below entitled "Caution Regarding Forward-Looking Information".
The 2016 Senior Notes and Air Canada's obligations under the 2016 Credit Facility are senior secured obligations of Air Canada, secured on a first lien basis, subject to certain permitted liens and exclusions, by certain real estate interests, ground service equipment, certain airport slots and gate leaseholds, and certain Pacific routes and the airport slots and gate leaseholds utilized in connection with these Pacific routes.
The 2016 Senior Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and state securities laws. The 2016 Senior Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act, and to persons other than U.S. persons in transactions outside the United States in reliance on Regulation S under the Securities Act.
The 2016 Senior Notes have not been and will not be qualified for sale to the public under applicable Canadian securities laws and, accordingly, any offer and sale of the 2016 Senior Notes in Canada will be made on a basis that is exempt from the prospectus requirement of such securities laws. The 2016 Senior Notes were offered and sold on a private placement basis to accredited investors in certain provinces of Canada.
This press release shall not constitute an offer to sell the 2016 Senior Notes or the solicitation of an offer to buy the 2016 Senior Notes, nor will there be any sale of the 2016 Senior Notes in any state or jurisdiction where such offer, solicitation or sale is not permitted. The 2016 Senior Notes were offered only through a preliminary and final offering memorandum and this press release is not intended to serve as the basis for any investment decision.
About Air Canada
Air Canada is Canada's largest domestic and international airline serving more than 200 airports on six continents. Canada's flag carrier is among the 20 largest airlines in the world and in 2015 served more than 41 million customers. Air Canada provides scheduled passenger service directly to 64 airports in Canada, 55 in the United States and 87 in Europe, the Middle East, Africa, Asia, Australia, the Caribbean, Mexico, Central America and South America. Air Canada is a founding member of Star Alliance, the world's most comprehensive air transportation network serving 1,330 airports in 192 countries. Air Canada is the only international network carrier in North America to receive a Four-Star ranking according to independent U.K. research firm Skytrax. For more information, please visit: www.aircanada.com, follow @AirCanada on Twitter and join Air Canada on Facebook.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This news release includes forward-looking statements within the meaning of applicable securities laws. Forward-looking statements 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, statements regarding the anticipated reduction in outstanding indebtedness, weighted average cost of debt, annualized interest expense, and increases in the value of unencumbered assets and related matters. Forward-looking statements are identified by the use of terms and phrases such as "preliminary", "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, including those described herein and are subject to important risks and uncertainties. Forward-looking 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, our ability to successfully achieve or sustain positive net profitability or to realize our initiatives and objectives, our ability to pay our indebtedness, reduce operating costs and secure financing, currency exchange, industry, market, credit, economic and geopolitical conditions, energy prices, competition, our ability to successfully implement strategic initiatives and our dependence on technology, war, terrorist acts, epidemic diseases, casualty losses, employee and labour relations, pension issues, environmental factors (including weather systems and other natural phenomena and factors arising from man-made sources), limitations due to restrictive covenants, insurance issues and costs, changes in demand due to the seasonal nature of the business, dependence on suppliers and third parties, including regional carriers, Aeroplan and the Star Alliance, changes in laws, regulatory developments or proceedings, pending and future litigation and actions by third parties and the ability to attract and retain required personnel, as well as the factors identified in section 17 "Risk Factors" of Air Canada's 2015 MD&A dated February 17, 2016 available at www.sedar.com.
In particular, estimates regarding reductions in Air Canada's outstanding indebtedness, weighted average cost of debt and annualized interest expense are dependent on a number of factors, risks and uncertainties, including changes in prevailing interest rates (including LIBOR) and the Canada-U.S. dollar exchange rate, both of which have varied significantly over the last several years and may continue to fluctuate. Estimated values of unencumbered assets reflect the good faith estimate of management, and such values may be subject to fluctuation over time due to a number of factors beyond Air Canada's control.
The forward-looking statements contained in this news release represent Air Canada's expectations as of the date of this news release (or as of the date they are otherwise stated to be made), and are subject to change after such date. However, Air Canada 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 Air Canada
For further information: Isabelle Arthur (Montréal), Isabelle.firstname.lastname@example.org, 514 422-5788; Peter Fitzpatrick (Toronto), email@example.com, 416 263-5576; Angela Mah (Vancouver), firstname.lastname@example.org, 604 270-5741; Internet: aircanada.com