Late Monday afteroon, The Globe and Mail revealed that federal government would announce a long-awaited relief package for Air Canada and parts of the airline industry on Monday evening.
Open Jaw continued to follow this breaking story and can now confirm that Air Canada has announced that it has entered into a series of debt and equity financing agreements with the Government of Canada, which will allow Air Canada to access up to $5.879 billion in liquidity through the Large Employer Emergency Financing Facility (LEEFF) program.
The financial package provides for fully repayable loans to Air Canada that the company would only draw down as required, as well as an equity investment, and is comprised of:
- Gross proceeds of $500 million for Air Canada shares at a price of $23.1793 per share;
- $1.5 billion in the form of a secured revolving credit facility secured on a first lien basis by assets of Aeroplan and Air Canada;
- $2.475 billion in the form of three unsecured non-revolving credit facilities
- As part of the financial package, Air Canada issued an aggregate of 14,576,564 warrants exercisable for the purchase of an equal number of Air Canada shares, subject to customary adjustments, at a price of $27.2698 per share during a 10-year term;
- Up to approximately $1.4 billion in the form of an unsecured credit
In return, Air Canada has agreed to a number of commitments related to customer refunds, service to regional communities, restrictions on the use of the funds provided, employment and capital expenditures. These include:
- Beginning April 13, 2021, offering eligible customers who purchased non-refundable fares but did not travel due to COVID-19 since February 2020, the option of a refund to the original form of payment. In support of its travel agency partners, Air Canada will not retract agency sales commissions on refunded fares;
- The resumption of service or access to Air Canada's network for nearly all regional communities where service was suspended because of COVID-19's impact on travel, through direct services or new interline agreements with third party regional carriers;
- Restricting certain expenditures, and restricting dividends, share buybacks and senior executive compensation;
- Obligations to maintain employment at levels which are no lower than those at April 1, 2021; and
- The completion of the airline's acquisition of 33 Airbus A220 aircraft, manufactured at Airbus' Mirabel, Quebec facility. Air Canada has also agreed to complete its existing firm order of 40 Boeing 737 Max aircraft.
The Globe & Mail's sources said Calgary-based WestJet is not included in the package being announced on Monday, but discussions are continuing. The Globe's sources also said parts of the package are expected to be available to other airlines, but Open Jaw can't confirm that information at this time.
