(TAN): Air Canada has recently completed two longer-term refinancing transactions for a total amount of approximately CAD 1.52 billion (USD 1.13 billion), replacing short-term facilities, the airline said.
The first transaction consists of a committed Secured Facility totalling CAD 787.7 million to finance Air Canada’s purchase of the first 18 Airbus A220 aircraft with a term of 12 years from delivery of each aircraft on a floating interest basis based on CDOR.
This equates to an interest rate of approximately 2.39% using current CDOR rates. As aircraft are financed under this new Canadian dollar Secured Facility, the Bridge Financing of CAD 787.7 million for the same 18 Airbus A220 aircraft put in place in April 2020 will be repaid concurrently. Any amount left unpaid under the Bridge Financing will be repaid following the financing of the 18th A220 aircraft expected in Q1 2021.
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The second transaction consists of a private placement of two tranches of Enhanced Equipment Trust Certificates, the proceeds of which were used to purchase equipment notes issued by Air Canada and secured by three Boeing 787-9 aircraft, three Boeing 777-300ER aircraft, one Boeing 777-200LR and nine A321-200 aircraft. The two tranches of certificates have a combined aggregate face amount of USD 552.6 million and a weighted average interest rate of 5.73%.
The private placement consists of Class A Certificates and Class B Certificates. The Class A Certificates totalling USD 452.6 million have an interest rate of 5.25% per annum and a final expected distribution date of April 1, 2029. The Class B Certificates totalling USD 100 million have an interest rate of 9.00% per annum and a final expected distribution date of October 1, 2025.
Air Canada used the proceeds from this financing together with cash on hand to repay in full the USD 600 million 364-day term loan originally put in place in April 2020.
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The debt maturities in 2021 previously disclosed in our Q2 2020 results will be, on a pro forma basis, reduced by approximately CAD 1.42 billion and are now estimated to total CAD 1.71 billion, once both aforementioned bridge loans are fully repaid.
“These two refinancing transactions were completed in an extremely challenging environment and continue to demonstrate Air Canada’s ability to access financial markets on attractive terms and conditions to either improve liquidity or to refinance existing debt to push out maturities longer term and lower overall financial risk,” said Pierre Houle, MD and treasurer of Air Canada.
