CEEFC announces financial assistance to Air Canada

Assistance will protect Canadian air travellers, jobs, and regional service

TORONTO, April 12, 2021 /CNW/ - Today, the Canada Enterprise Emergency Funding Corporation (CEEFC), a subsidiary of Canada Development Investment Corporation (CDEV), announced that it will enter into agreements with Air Canada to provide financial support to the airline to protect jobs and to ensure vital national and international connectivity for Canadians and Canadian businesses.

Under the terms of the agreements, Air Canada will have access to approximately $4 billion in loans (including $1.5 billion as a secured loan and $2.475 billion in unsecured loans) through the Large Employer Emergency Financing Facility's (LEEFF) financial support for the airline industry. Under LEEFF, CEEFC is also purchasing $500 million of newly-issued Class B Voting Shares from Air Canada at a 15% discount to their recent trading price. CEEFC will also receive warrants to purchase Air Canada shares in conjunction with its loan commitments.

Air Canada – Canada's largest domestic and international carrier – is one of the world's 20 largest airlines. The company currently has 14,859 active Canadian employees. As a condition of its agreement with CEEFC, Air Canada has committed to maintaining jobs, resuming air service, and refunding customers for flights cancelled during the pandemic. CEEFC will make an additional approximately $1.4 billion available to Air Canada, in the form of a repayable loan, to finance refunds to eligible customers.

Additionally, the financial assistance will ensure that Air Canada remains a key customer of Canada's aerospace industry. The company will move forward with the planned purchase of more environmentally friendly aircraft.

LEEFF provides large Canadian employers with access to financing to preserve jobs and continue operations during this challenging period.

Lazard acted as sole financial advisor to CEEFC for the transaction. Davies Ward Phillips & Vineberg LLP acted as legal advisor to CEEFC.

Additional Disclosure

CEEFC is purchasing 21,570,942 Class B voting shares of Air Canada (each a "Share"), at a price of $23.17933 per Share for a total purchase price of $500 million. Air Canada also issued to CEEFC 14,576,564 warrants (each a "Warrant") as consideration for CEEFC making the $2.475 billion unsecured loan (the "Unsecured Loan Facilities") and the $1.5 billion secured loan available to Air Canada (the issuance of Warrants, together with the issuance of the Shares, the "Investment"). Immediately prior to the Investments, CEEFC and its affiliates owned no voting or equity securities in the capital of Air Canada. Immediately following the Investment, CEEFC and its affiliates held 21,570,942 Shares and 14,576,564 Warrants (the "Purchased Securities").

On exercise, each Warrant initially entitles CEEFC to purchase one Share (the "Share Rate") at an initial exercise price of $27.2698 per Share (the "Exercise Price"). At the option of CEEFC, the Exercise Price may be satisfied by way of cash payment or, in lieu of making a cash payment, by way of cashless exercise. Warrants may be exercised, in whole or in part, at any time prior to April 12, 2031. However, CEEFC may only exercise vested Warrants. Half (or 7,288,282) of the Warrants will vest immediately upon issuance of the Warrants (the "Initially Vested Warrants"). The other half (or 7,288,282) of the Warrants (the "Unvested Warrants") will vest in the same proportion and at the same time as advances, if any, are made under the Unsecured Loan Facilities.

If CEEFC exercised all of the Initially Vested Warrants by way of cash payment at the initial Exercise Price of $27.2698 and applying the initial Share Rate, CEEFC and its affiliates would own 28,859,224 Shares, representing approximately 7.91% of the outstanding voting securities of Air Canada (or 11.59% of the outstanding Class B voting shares) on a partially diluted basis after giving effect to such exercise. If CEEFC was entitled to, and did, exercise all of the Warrants (including all of the Unvested Warrants), applying the same initial Exercise Price and Share Rate, CEEFC and its affiliates would own 36,147,506 Shares, representing approximately 9.71% of the outstanding voting securities of Air Canada (or 14.10% of the outstanding Class B voting shares) on a partially diluted basis after giving effect to such exercise.

CEEFC is restricted from transferring any Purchased Securities and any Shares issuable on exercise of the Warrants (together with the Purchased Securities, the "Investment Securities") until April 12, 2022, and thereafter is subject to certain limitations on the persons to whom those securities may be transferred, in each case, subject to certain exceptions.

CEEFC intends to hold the Investment Securities for investment purposes. Depending on market conditions and other factors, including Air Canada's business and financial condition, and subject to the transfer restrictions noted above, CEEFC or its affiliates may dispose of some or all of the securities of Air Canada that it owns at such time. CEEFC and its affiliates do not intend to acquire additional equity securities of Air Canada except through the possible exercise of the Warrants.

SOURCE Canada Enterprise Emergency Funding Corporation

For media inquiries please contact: Canada Enterprise Emergency Funding Corporation, Media Relations Team, [email protected].