Air Canada has completed two longer-term refinancing transactions for a total amount of approximately $1.52 billion, replacing short-term facilities.
The first transaction, totalling $787.7 million, covers financing for Air Canada's purchase of the first 18 Airbus A220 aircraft, which, in turn, is expected to lower the airline’s short-term cash expenditures.
This refinancing has a term of 12 years from the delivery of each plane on a floating interest basis, equating to an approximate interest rate of 2.39% using current CDOR rates.
Air Canada will repay the C$787.7 bridge financing for the same 18 A220 aircraft that was put in place in April 2020.
Any amount that is left unpaid will be repaid following the financing of the 18th A220, which is expected in early 2021.
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 U.S.$552.6 million and a weighted average interest rate of 5.73%.
READ MORE: Air Canada takes delivery of first A220-300
The private placement is comprised of Class A Certificates (totalling U.S.$452.6 million) and Class B Certificates (totalling U.S.$100 million).
Air Canada used the proceeds from this financing together with cash to repay in full the U.S.$600 million 364-day term loan originally put in place in April 2020.
The debt maturities in 2021 previously disclosed in Air Canada’s Q2 2020 results will be, on a pro forma basis, reduced by approximately $1.42 billion and are now estimated to total $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," stated Pierre Houle, managing director and treasurer at Air Canada.
Don't miss a single travel story: subscribe to PAX today!