MIAMI – Air Canada (AC) has announced it completed two US$1.52bn longer-term refinancing transactions. These will replace the airline’s previous short-term facilities.
The first transaction consists of a committed Secured Facility of about US$787.7m. The second transaction consists of a private placement of two tranches of Enhanced Equipment Trust Certificates totaling US$552.6m.
Detailed First Financial Operation
The airline said it would use the committed US$787.7m to finance its first 18 Airbus A220 aircraft purchase. The sale has a term of 12 years from the delivery of each jet on a floating interest basis, based on the Canadian Dollar Offered Rate (CDOR).
As such, the jets are financed under this new Canadian dollar Secured Facility. Thus, the US$787.7m Bridge Financing for the same 18 Airbus A220 aircraft, started in April 2020, will be repaid concurrently. The financing of the 18 Airbus A220 aircraft would take place in Q1 2021.
Disclosed Second Transaction
According to the airline, the US$552.6m proceeds of the second transaction went to purchase its equipment notes. Both Class A and Class B Tranches Certificates have a weighted average interest rate of 5.73%. Here, each loan’s interest rate contributes to the weighted average in proportion to the loan’s percentage of the total debt.
The carrier also informed that several aircraft secured the operation. These include three Boeing 787-9, three Boeing 777-300ER, one Boeing 777-200LR and nine A321-200 aircraft.
While the Class A Certificates totalize US$452.6m, Class B Certificates totalize US$100m. The first certificates have an interest rate of 5.25% per year and a final expected distribution date of April 1, 2029. In contrast, the second ones have an interest rate of 9.00% per year and a final expected distribution date of October 1, 2025.
As a result of these refinancing transactions, AC said that its long-term debt maturities in 2021 will experience a reduction. This will amount to US$1.42bn with a current estimation of US$1.71bn. The airline specified that the balance sheet will record these numbers once both described bridge loans are fully repaid.
Featured image: Air Canada. Photo: Liam Funnell.