MIAMI – Air Canada (AC) has just announced it closed two financing transactions for net proceeds of US$1.23bn.
Since March, the Canadian flag carrier has raised a liquid US$5.5bn. The airline, like most airlines all over the world, has faced significant drops in net-revenues due to the COVID-19 outbreak.
The first financing transaction was for $823-Million through second-lien notes. These were sold at an aggregate principal amount of 9% and are due returned in 2024.
Loans for necessary funding
The loans secured obligations and are used to fund ground service equipment, certain routes, and associated airport slots and gate leases.
The second transaction, for US$300m, was obtained through Class C pass-through certificates.
This particular loan is at an interest rate of 10.5% per annum and has a final distribution date set for July 2026.
‘Positive Financial Result for Air Canada’
Air Canada’s Managing Director and Treasurer Pierre Houle says that adding US$1.23bn without using any unencumbered assets “leaves the airline in an excellent position to access additional funds should the need arise.”
The director added, “Complementing these efforts have been ongoing initiatives to reduce cash burn through such measures as workforce reductions, a US$1.1bn Cost Transformation Program and capacity and network rationalization.”
Houle concluded the news release by discussing Air Canada’s strong financial position prior to COVID-19.
Air Canada keeps its strong financial position
The director pointed towards the strong balance sheet, significant liquidity, and low net leverage as reasons the airline was able to remain in a decent financial position through the drop in demand.
Air Canada will use the generated proceeds to supplement working capital and expects to finish the second quarter with at least US$9bn in liquidity.
They will also continue to explore other financial arrangements in case additional liquidity is deemed necessary.