Air Canada has raised $1.23 billion with the closure of two facilities – a private offering of $840 million 9.00% second lien secured notes due 2024 and a C tranche EETC offering for $315 million.
The 2024 notes, which were sold at 98% of par, were secured on a second lien basis by certain real estate interests, ground service equipment, certain airport slots and gate leaseholds, and certain routes and the airport slots and gate leaseholds utilized in connection with those routes.
Air Canada’s private offering of $315 million one tranche of Class C EETCs sold at 95.002% of par. The Class C tranche ranks junior to the previously issued Series 2015-1, Series 2015-2, and Series 2017-1 EETCs, and is secured by liens on the 27 aircraft financed under the Series 2015-1, Series 2015-2, and Series 2017-1 EETCs. The Class C EETCs have an interest rate of 10.500% per annum, and a final expected distribution date of July 15, 2026.
"The fact Air Canada was able to add $1.23 billion to its liquidity with these last two transactions without utilizing any of its previously disclosed unencumbered assets leaves the airline in an excellent position to access additional funds should the need arise. Complementing these efforts have been ongoing initiatives to reduce cash burn through such measures as workforce reductions, a $1.1 billion Cost Transformation Program and capacity and network rationalization," said Pierre Houle, Managing Director and Treasurer of Air Canada.
With these financings, Air Canada has raised $5.5bn in 2020 and expects to end the second quarter with “at least $9 billion in liquidity” said Houle.
In March 2020, Air Canada drew down its $600 million and $200 million revolving credit facilities for aggregate proceeds of $1.03 billion.
In April 2020, the airline concluded a $600 million 364-day term loan in the amount of US$600 million, secured by aircraft and spare engines, as well as concluding a bridge financing of $788 million for 18 Airbus A220 aircraft which Air Canada expects to replace with longer-term secured financing arrangements later in 2020.
Earlier in June 2020, Air Canada concluded an underwritten marketed public offering of 35,420,000 Class A Variable Voting Shares and/or Class B Voting Shares at a price to the public of $16.25 per share, for aggregate proceeds of $575.6 million, and a concurrent marketed private placement of convertible senior unsecured notes due 2025 for aggregate proceeds of US$747.5 million.
"We entered 2020 on the doorstep of investment grade with a very strong balance sheet, low net leverage and significant liquidity, before the COVID-19 pandemic and government-imposed quarantines and border restrictions destroyed demand and depleted cash.
Air Canada's strong relative position has allowed us to navigate through this crisis and we have full confidence that we will be successful in maintaining liquidity at levels more than sufficient to meet the challenges and take advantage of the opportunities ahead," said Houle.
Air Canada is utilizing the net proceeds from these transactions to supplement its working capital and for other general corporate purposes as well as boosting Air Canada's cash position.