Air Canada Concludes Liquidity Agreement With the Canadian Government
Air Canada has entered a series of debt and equity financing agreements with the Government of Canada to access up to $5.879 billion under Canada’s Large Employer Emergency Financing Facility Program (LEEFF).
On Monday (April 12, 2021), Air Canada announced that they have reached an agreement with the Canadian Government to access up to $5.879 billion in liquidity through debt and equity financing agreements via Canada’s Large Employer Emergency Financing Facility Program (LEEFF). The financing package includes fully repayable loans that Air Canada can draw down as needed, as well as an equity investment. The equity portion of the package include the gross proceeds of $500 million for Air Canada shares at $23.1793/share, a $1.5 billion secured revolving credit facility (secured on a first lien basis by Aeroplan, Air Canada’s loyalty program) and 2.475 billion in three unsecured revolving credit facilities of $825 million each in five, six and seven year tranches. Air Canada also issued an aggregate of 14,576,564 warrants, exercisable at $27.2698/share during a 10-year period. Additionally, the package includes a $1.4 billion unsecured credit facility to support customer refunds of non-refundable tickets.
In Monday’s announcement, Air Canada’s President and Chief Executive Officer, Michael Rousseau, said,
“Air Canada entered the pandemic more than a year ago with one of the global airline industry's strongest balance sheets relative to its size. We have since raised an additional $6.8 billion in liquidity from our own resources to sustain us through the pandemic, as air traffic ground to a virtual halt in Canada and internationally.
“The additional liquidity program we are announcing today achieves several aligned objectives as it provides a significant layer of insurance for Air Canada, it enables us to better resolve customer refunds of non-refundable tickets, maintain our workforce and re-enter regional markets. Most importantly, this program provides additional liquidity, if required, to rebuild our business to the benefit of all stakeholders and to remain a significant contributor to the Canadian economy through its recovery and for the long term.
“As vaccine deployments ramp up, we continue to work with the Government of Canada on the evolution of safe and science-based test and quarantine relief measures with a view to safely restarting our sector. We know that Canadians are looking forward to re-connecting with friends and family and taking those long-awaited vacations and business trips and we will be ready to safely connect Canadians within Canada and Canada to the world.”
As part of the financial package, Air Canada has agreed to several commitments related to ticket refunds, regional service and a restriction on the ese of funds for employment and CAPEX. Starting today (April 13, 2021), customers who purchased a non-refundable ticket but didn’t travel due the pandemic since February 2020 can now receive a refund in the original form of payment. The carrier will also resume service to nearly all regional communities and restrict certain expenditures including dividends, share buybacks and senior executive compensation. Additionally, the company will also be required to maintain employment at levels no lower than those at April 1, 2021. Finally, Air Canada must complete their acquisition of 33 Airbus A220s manufactured at the Airbus facility in Mirabel, Canada. The airline has also agreed to complete their existing firm order for 40 Boeing 737 MAX aircraft.
Source: Air Canada