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Last updated on April 17, 2014 at 8:20 EDT

Air Canada Announces Proposed Refinancing Transaction; Launches Tender Offers and Consent Solicitations for its 9.250% Senior Secured Notes due 2015, 10.125% Senior Secured Notes due 2015, and 12.000% Senior Second Lien Notes due 2016

September 5, 2013

MONTREAL, Sept. 5, 2013 /PRNewswire/ – Air Canada today announced that
it intends to refinance approximately C$1.1 billion principal amount of
its outstanding senior notes and, as part of the refinancing, has
launched cash tender offers for any and all of its 9.250% Senior
Secured Notes due 2015 (the “USD Senior Secured Notes”), 10.125% Senior
Secured Notes due 2015 (the “CAD Senior Secured Notes” and together
with the USD Senior Secured Notes, the “Senior Secured Notes”), and
12.000% Senior Second Lien Notes due 2016 (the “USD Second Lien Notes”)
(collectively, the “Existing Notes”). The refinancing transaction, if
completed as currently proposed, will extend the maturity of Air
Canada’s long-term debt and lower its costs of financing.

Proposed Refinancing Transaction

Subject to market and other conditions, Air Canada plans to enter into a
new senior secured term loan and revolving credit facility governing
U.S.$800 million of indebtedness (the “New Credit Facility”) and
commence private offerings of C$300 million aggregate principal amount
of senior secured notes (the “New Senior Secured Notes”) and U.S.$300
million aggregate principal amount of senior second lien notes (the
“New Senior Second Lien Notes” and, together with the New Senior
Secured Notes, the “New Senior Notes”).  The New Credit Facility is
currently expected to include a US$100 million revolving credit
facility and a US$700 million term loan.  Proceeds from this
refinancing transaction will be used to purchase any and all of the
Existing Notes that are validly tendered in connection with the cash
tender offers and related consent solicitations described below for its
Existing Notes and to redeem or repurchase any Existing Notes not
purchased in the tender offers. Air Canada intends to use the remaining
proceeds, if any, for working capital and general corporate purposes.

The New Credit Facility and the New Senior Notes will be senior secured
obligations of Air Canada, to be guaranteed on a senior secured basis
by one or more of Air Canada’s subsidiaries, and secured (on a first
lien basis with respect to the New Credit Facility and the New Senior
Secured Notes and on a second lien basis with respect to the New Senior
Second Lien Notes), subject to certain permitted liens and exclusions,
by accounts receivable, certain real estate interests, certain spare
engines, ground service equipment, certain airport slots and gate
leaseholds, and certain Pacific routes and the airport slots and gate
leaseholds utilized in connection with these Pacific routes.

It is anticipated that the New Senior Notes will be offered and sold on
a private placement basis to accredited investors in certain provinces
of Canada. In the United States, the New Senior Notes will be offered
and sold only to qualified institutional buyers in reliance on Rule
144A under the Securities Act of 1933, as amended (the “Securities
Act”), and to certain non-U.S. persons in transactions outside the
United States in reliance on Regulation S under the Securities Act. The
New Senior Notes will be offered only through a preliminary and final
offering memorandum and this press release is not intended to serve as
the basis for any investment decision.

Tender Offers for the Existing Notes

In connection with its proposed refinancing transaction, Air Canada has
launched cash tender offers for any and all of its Existing Notes for
the cash consideration per US$1,000 or C$1,000 principal amount, as
applicable, set forth next to the corresponding series of Existing
Notes in the table below.  These offers consist of three separate
offers, one for each series of Existing Notes listed below (each, a
“Tender Offer,” and collectively, the “Tender Offers”).  In connection
with the Tender Offers, Air Canada is also soliciting consents (the
“Consent Solicitations”) to amend the Existing Notes and the respective
indentures that govern them to eliminate most of the restrictive
covenants and certain events of default contained in the indentures
(the “Proposed Indenture Amendments”) and to release all of the
collateral securing the Existing Notes (the “Proposed Collateral
Release Amendments” and, together with the Proposed Indenture
Amendments, the “Proposed Amendments”).  The Tender Offers and the
Consent Solicitations are being made pursuant to an Offers to Purchase
and Consent Solicitations Statement dated September 5, 2013 (the
“Statement”) and related Letters of Transmittal and Consent, each dated
September 5, 2013 (the “Letters of Transmittal” and, collectively with
the Statement, the “Offer Materials”).

Information related to the Existing Notes, the Tender Offers and the
Consent Solicitations is listed in the table below. The Offer Materials
more fully set forth the terms and conditions of the Tender Offers and
the Consent Solicitations.

     ________________________________________________________________________________________
    |           |          |             |              |             | Early  |             |
    |           |  CUSIP   |             |  Outstanding |Tender Offer | Tender |    Total    |
    |Description|(144A/Reg |    ISIN     |   Principal  |Consideration|Premium |Consideration|
    | of Notes  |    S)    |(144A/Reg S) |     Amount   |     (1)     |  (1)   |   (1)(2)    |
    |___________|__________|_____________|______________|_____________|________|_____________|
    |9.250%     |          |             |              |             |        |             |
    |Senior     |          |             |              |             |        |             |
    |Secured    |          |             |              |             |        |             |
    |Notes due  |008911AK5/|USC01026AV28/|              |             |        |             |
    |2015       |C01026AV2 |US008911AK56 |US$600,000,000|US$1,014.63  |US$30.00|US$1,044.63  |
    |___________|__________|_____________|______________|_____________|________|_____________|
    |10.125%    |          |             |              |             |        |             |
    |Senior     |          |             |              |             |        |             |
    |Secured    |          |             |              |             |        |             |
    |Notes due  |008911AM1/|CA008911AM15/|              |             |        |             |
    |2015       |008911AN9 |CA008911AN97 |C$300,000,000 |C$1,018.57   |C$30.00 |C$1,048.57   |
    |___________|__________|_____________|______________|_____________|________|_____________|
    |12.000%    |          |             |              |             |        |             |
    |Senior     |          |             |              |             |        |             |
    |Second Lien|          |             |              |             |        |             |
    |Notes due  |008911AP4/|USC01026AW01/|              |             |        |             |
    |2016       |C01026AW0 |US008911AP44 |US$200,000,000|US$1,067.50  |US$30.00|US$1,097.50  |
    |___________|__________|_____________|______________|_____________|________|_____________|

           Per US$1,000 principal amount of USD Senior Secured Notes and
    (1)    USD Second Lien Notes or C$1,000 principal amount of CAD Senior
           Secured Notes, as applicable.

    (2)    Includes the Early Tender Premium.

Holders who validly tender (and do not validly withdraw) their Existing
Notes and validly deliver (and do not validly revoke) their consents on
or prior to 5:00 p.m., New York City time, on September 18, 2013,
unless extended or earlier terminated (the “Early Tender Deadline”),
will be eligible to receive US$1,044.63, C$1,048.57 and US$1,097.50 per
US$1,000 or C$1,000 principal amount, as applicable, of USD Senior
Secured Notes, CAD Senior Secured Notes and USD Second Lien Notes,
respectively (the “Total Consideration”), if such Existing Notes are
accepted for purchase.  The Total Consideration includes an early
tender payment of US$30.00 or C$30.00 per US$1,000 or C$1,000 principal
amount, as applicable, of Existing Notes.

As described more fully in the Statement, the Total Consideration with
respect to the Senior Secured Notes was determined with consideration
given to Air Canada’s right to redeem 10% of the original principal
balance of each series of such Existing Notes at 103% of the principal
amount thereof (a “10% Redemption”) and Air Canada’s right to redeem
the balance of such Existing Notes at a redemption price of 104.625% of
the principal amount thereof in the case of the USD Senior Secured
Notes and 105.063% of the principal amount thereof in the case of the
CAD Senior Secured Notes (a “Senior Secured Notes Early Redemption”).

Air Canada currently intends to redeem any Senior Secured Notes that
remain outstanding following the consummation of the Tender Offers as
part of an exercise of its satisfaction and discharge rights under the
indenture governing the Senior Secured Notes pursuant to a 10%
Redemption, with any remaining outstanding balance of such Existing
Notes to be redeemed pursuant to a Senior Secured Notes Early
Redemption.  Similarly, Air Canada intends to redeem any USD Second
Lien Notes that remain outstanding following the consummation of the
Tender Offers as part of an exercise of its satisfaction and discharge
rights under the indenture governing the USD Second Lien Notes pursuant
to Air Canada’s right to redeem the USD Second Lien Notes at a
redemption price of 109% of the principal amount thereof.

The Tender Offers and Consent Solicitations will expire at 11:59 p.m.,
New York City time, on October 2, 2013, unless extended or earlier
terminated (as extended or earlier terminated, the “Expiration Time”).

Holders who validly tender (and do not validly withdraw) their Existing
Notes and deliver (and do not validly revoke) their consents after the
Early Tender Deadline but on or before the Expiration Time will receive
US$1,014.63, C$1,018.57 and US$1,067.50 per US$1,000 or C$1,000
principal amount, as applicable, of USD Senior Secured Notes, CAD
Senior Secured Notes and USD Second Lien Notes, respectively (the
“Tender Offer Consideration”), if such Existing Notes are accepted for
purchase.

Upon the terms and conditions described in the Offer Materials, payment
for Existing Notes accepted for purchase will be made (a) if the
Company so elects (at its sole option), with respect to Existing Notes
validly tendered and not validly withdrawn at or prior to the Early
Tender Deadline, on any date between the Early Tender Deadline and the
Expiration Time (an “Early Settlement Date”), and (b) if the Company
does not elect to have an Early Settlement Date and with respect to
Existing Notes validly tendered after the Early Tender Deadline but at
or prior the Expiration Time, promptly after the Expiration Time. 
Holders whose tendered Existing Notes are accepted for purchase also
will receive accrued and unpaid interest from the most recent interest
payment date for the Existing Notes, to, but not including, the
applicable payment date for the Existing Notes in the Tender Offers.

The Tender Offers and Consent Solicitations are part of the proposed
refinancing of Air Canada’s outstanding indebtedness and are subject to
the satisfaction or waiver of certain conditions, including a financing
condition and general conditions.  The Tender Offers are not conditioned upon receipt of the requisite
consents with respect to the Proposed Amendments.
With respect to each Tender Offer and Consent Solicitation, if any
conditions to such Offer and Consent Solicitation are not satisfied,
Air Canada is not obligated to accept for payment, purchase or pay for,
and may delay the acceptance for payment of, any tendered Existing
Notes in respect of such Offer and Consent Solicitation and may even
terminate or withdraw the Offer and Consent Solicitation.

Consents in respect of at least a majority in aggregate principal amount
of the outstanding USD Senior Secured Notes and CAD Senior Secured
Notes (voting together as a single class) are required to approve the
Proposed Indenture Amendments under the indenture governing the Senior
Secured Notes, and consents in respect of at least a majority in
aggregate principal amount of the outstanding USD Second Lien Notes are
required to approve the Proposed Indenture Amendments under the
indenture governing the USD Second Lien Notes.  Consents in respect of
at least 75% in aggregate principal amount of the outstanding USD
Senior Secured Notes and CAD Senior Secured Notes (voting together as a
single class) are required to approve the Proposed Collateral Release
Amendments under the indenture governing the Senior Secured Notes, and
consents in respect of at least 75% in aggregate principal amount of
the outstanding USD Second Lien Notes are required to approve the
Proposed Collateral Release Amendments under the indenture governing
the USD Second Lien Notes.

Holders may not tender their Existing Notes without delivering their
consents pursuant to the Consent Solicitations and may not deliver
consents without tendering their Existing Notes pursuant to the Tender
Offers; and holders are not permitted to validly revoke a consent
without validly withdrawing the previously tendered Existing Notes to
which the consent relates.  Existing Notes tendered can only be
withdrawn, and related consents revoked, before 5:00 p.m., New York
City time, on September 18, 2013, unless extended or earlier
terminated, except in certain limited circumstances where additional
withdrawal rights are required by law.

The complete terms and conditions of the Tender Offers and Consent
Solicitations are described in the Offer Materials, copies of which may
be obtained by contacting Global Bondholder Services Corporation, the
Information Agent for the Tender Offers and related Consent
Solicitations with respect to the USD Senior Secured Notes and USD
Second Lien Notes, at (866) 470-3800 (U.S. toll-free) or (212)
430-3774, or by contacting CST Phoenix Advisors, the Information Agent
for the Offer and related Consent Solicitation with respect to the CAD
Senior Secured Notes, at (800) 332-6309 (North America toll-free) or
201-806-2222 (collect calls).  Air Canada has engaged Citigroup Global
Markets Inc. to serve as dealer manager and solicitation agent for the
Tender Offers and Consent Solicitations.  Questions concerning the
Tender Offers and Consent Solicitations should be directed to Citigroup
Global Markets Inc. at (800) 558-3745 (toll-free) or (212) 723-6106.

This press release shall not constitute an offer to sell the New Senior
Notes or the solicitation of an offer to buy the New Senior Notes, nor
shall there be any sale of the New Senior Notes, in any state or
jurisdiction where such offer, solicitation or sale is not permitted. 
The New Senior Notes will not be qualified for sale to the public under
applicable Canadian securities laws and, accordingly, any offer and
sale of the New Senior Notes in Canada will be made on a basis that is
exempt from the prospectus requirement of such securities laws. The New
Senior Notes will not be registered under the Securities Act or the
securities laws of any other jurisdiction and may not be offered or
sold in the United States absent registration or an applicable
exemption from the registration requirements of the Securities Act and
state securities laws.

This press release is not an offer to purchase, a solicitation of an
offer to sell or a solicitation of consents with respect to the
Existing Notes or any other securities.  The Tender Offers and Consent
Solicitations are made solely by means of the Offer Materials.  The
Tender Offers and Consent Solicitations are not being made in any
jurisdiction in which the making or acceptance thereof would not be in
compliance with the securities, “blue sky” or other laws of such
jurisdiction.  None of Air Canada, the dealer manager, the information
agents, the depositaries, the trustee and the collateral trustees under
the indentures governing the Existing Notes or any of their respective
affiliates is making any recommendation as to whether or not holders
should tender all or any portion of their Existing Notes in the Tender
Offers or deliver their consents to the Proposed Amendments and, if so,
as to the amount of Existing Notes to tender.

About Air Canada

Air Canada is Canada’s largest domestic and international airline
serving more than 175 destinations on five continents.  Canada’s flag
carrier is among the 20 largest airlines in the world and in 2012
served close to 35 million customers.  Air Canada provides scheduled
passenger service directly to 60 Canadian cities, 49 destinations in
the United States and 67 cities in Europe, the Middle East, Asia,
Australia, the Caribbean, Mexico and South America. Air Canada is a
founding member of Star Alliance, the world’s most comprehensive air
transportation network serving 1,328 destinations in 195 countries. 
Air Canada is the only international network carrier in North America
to receive a Four-Star ranking according to independent U.K. research
firm Skytrax that ranked Air Canada in a worldwide survey of more than
18 million airline passengers as Best Airline in North America in 2013
for the fourth consecutive year.  For more information, please visit: www.aircanada.com.

Caution Regarding Forward-Looking Information

This press release includes forward-looking statements within the
meaning of applicable securities laws. Forward-looking statements in
this press release may involve, but are not limited to, statements
regarding the payment of the Total Consideration and the Tender Offer
Consideration, anticipated amendments to the indentures governing the
Existing Notes and the release of collateral securing the Existing
Notes, Air Canada’s intention to redeem any untendered Existing Notes,
proposed refinancing plans and related matters.  Forward-looking
statements are identified by the use of terms and phrases such as
“preliminary”, “anticipate”, “believe”, “could”, “estimate”, “expect”,
“intend”, “may”, “plan”, “predict”, “project”, “will”, “would” and
similar terms and phrases, including references to assumptions.  Risks,
uncertainties and assumptions that could cause actual results to differ
materially from the results indicated in the forward-looking statements
include, among other things, the successful completion and composition
of any refinancing transaction, the completion of the Tender Offers and
the receipt of consents sufficient to approve the Proposed Indenture
Amendments and Proposed Collateral Release Amendments.

Forward-looking statements, by their nature, are based on assumptions,
including those described herein and are subject to important risks and
uncertainties.  Forward-looking statements cannot be relied upon due
to, amongst other things, changing external events and general
uncertainties of the business and the capital markets.  Actual results
may differ materially from results indicated in forward-looking
statements due to a number of factors, including without limitation,
industry, market, credit and economic conditions, the ability to reduce
operating costs and secure financing, pension issues, energy prices,
employee and labour relations, currency exchange and interest rates,
competition, war, terrorist acts, epidemic diseases, environmental
factors (including weather systems and other natural phenomena and
factors arising from man-made sources), insurance issues and costs,
changes in demand due to the seasonal nature of the business, supply
issues, changes in laws, regulatory developments or proceedings,
pending and future litigation and actions by third parties as well as
the factors identified throughout this news release and those
identified throughout Air Canada’s public disclosure file available at www.sedar.com.  In particular, the proposed New Credit Facility, the proposed
offerings of New Senior Notes and the Tender Offers and Consent
Solicitations are subject to general market and other conditions and
there are no assurances that the proposed New Credit Facility, the
proposed offerings of New Senior Notes and the Tender Offers and
Consent Solicitations will be completed or that the terms of the
proposed New Credit Facility, the proposed offerings of New Senior
Notes and the Tender Offers and Consent Solicitations will not be
modified.  The forward-looking statements contained in this news
release represent Air Canada’s expectations as of the date of this news
release (or as of the date they are otherwise stated to be made), and
are subject to change after such date.  However, Air Canada disclaims
any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required under applicable securities regulations.

SOURCE Air Canada


Source: PR Newswire