Transat has reached an agreement with the Government of Canada to borrow up to $700 million in liquidity under the government’s Large Employer Emergency Funding Facility (LEEFF). The company will also refund previously issued travel credits for eligible customers.
On Thursday (April 29, 2021), Transat A.T. Inc. announced that the company has reached an agreement with the Government of Canada to borrow up to $700 million in additional liquidity under the government’s Large Employer Emergency Financing Facility (LEFF) program. The fully repayable credit facilities are made available by the Canada Enterprise Emergency Funding Corporation and will by used by Transat on an as-needed basis. The company will borrow $390 million, the estimated liquidity needed to support the business until it can once again generate cash, under various facilities.
An amount of $78 million will be borrowed in the form of a non-revolving secured credit facility bearing interest at the Canadian Dollar Offered Rate (CDOR) plus 4.5% and a 2-year maturity. An additional $312 million will be borrowed in the form of a non-revolving unsecured credit facility with a 5-year maturity and interest rate of 5% in year one, 8% in year 2 and 2% thereafter. As part of the transaction, Transat has issued 13,000,000 warrants for the purchase of shares at an exercise price of $4.50/share. The warrants will vest in proportion to the drawings that will be made and 50% will be forfeited if the loans are repaid in full during the first year.
An additional amount $310 million will be borrowed under an unsecured credit facility to provide refunds to customers with scheduled departures on or after February 1, 2020, who received travel credits. The policy applies to flights and packages booked by April 29, 2021.
This loan will be repayable over a seven year period at the current 7-year Canada Bond rate of 1.2%.
Transat has made certain commitments in connection with the establishment of these credit facilities, including issuing refunds to eligible customers who previously received travel credits. Additionally, the company has agreed to restrictions on dividends, stock repurchases and executive compensation, as well as maintaining active employment at the level of April 28, 2021. Amounts already drawn on existing credit facilities will remain in place and extended for two years from implementation of the new financing, and undrawn debt under the short-term subordinated facility will be canceled.
Including previous funding of $120 million, the total available financing will represent a maximum of $820 million. The previous funding includes a $50 million secured revolving credit facility with the National Bank of Canada and Bank of Nova Scotia, as well as $70 million under the subordinated credit facility with the National Bank of Canada and Export Development Canada.
In a separate press release today, Air Transat detailed their commitment to offer refunds for travel credits issued due to the global COVID-19 pandemic. Customers with travel credits must submit their refund request to Transat by August 26, 2021 at airtransat.com/refunds. If travel was originally booked via a travel agent or online travel agency, customers are asked to contact them directly.
In Today’s refund policy announcement, Transat’s Chief Operating Officer, Annick Guérard, said,
“We've been impatiently waiting for this moment, and we know our customers have been, too. Now that a funding agreement has been reached and the eligibility criteria have been established by the Government of Canada, we are delighted to be able to provide our customers with this long-awaited aid. T ravel agents have shown unwavering resilience and support since the crisis began. That's why we're pleased to confirm that commissions earned by agents will not be recalled if their customers opt for a refund.”
Based in Montreal, Transat A.T. Inc. (TSX: TRZ) has 5,000 employees and is the third largest airline in Canada and leading integrated tourism company specializing in holiday travel. The company offers vacation packages, hotel accommodations and air service to more than 60 destinations over 25 countries in the Americas and Europe. Air Transat has been named ‘World’s Best Leisure Airline’ at the Skytrax World Airline Awards.
Source: Air Transat