Air Canada Completes C$1.25 Billion Refinancing

Air Canada has completed its previously announced private offering of C$200 million of 4.75% senior secured first lien notes due 2023 (the 2016 Senior Notes) and the closing of its previously announced US$1.1 billion new senior secured credit facility, comprised of a US$800 million term loan maturing in 2023, together with a new, undrawn US$300 million revolving credit facility expiring in 2021.

The 2016 Credit Facility has an initial interest rate of 275 basis points over LIBOR (subject to a LIBOR floor of 75 basis points).

Air Canada received aggregate net proceeds of approximately C$1.23 billion from the sale of the 2016 Senior Notes and from the term loan under the 2016 Credit Facility (in each case, after deduction of the applicable transaction costs, fees and expenses).

Air Canada applied the net proceeds, together with approximately C$444 million of cash on hand, to redeem all of Air Canada's outstanding senior secured notes due 2019 and 2020, and to repay Air Canada's outstanding US$300 million secured term loan.

In conjunction with such repayment and redemption, C$61 million in premium costs were paid, and a write off of transaction costs and discounts of $C21 million was recorded, both of which will be reported as an interest charge in 2016.

Air Canada's 7.750% senior unsecured notes due 2021 were not called for redemption and remain outstanding.

"This transaction achieved several key objectives and represents a meaningful improvement to our balance sheet. Since the end of the second quarter of 2013, we have reduced the weighted average cost of our overall debt by approximately 150 basis points, to 4.49 per cent. This transaction also extends the maturities of our senior secured debt to 2023. We now have even greater flexibility to continue to execute on our strategic initiatives and create additional value for shareholders," said Calin Rovinescu, President and Chief Executive Officer. "We expect to realize annualized interest expense savings of approximately C$60 million. We have also freed up collateral with a value of approximately C$650 million, bringing the total estimated value of Air Canada's unencumbered assets to approximately C$2 billion. We also added US$90 million in capacity to our revolving credit facility, up to US$300 million." 

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