29chev
27th Apr 2004, 00:05
Air Canada Announces Revised Agreement With Deutsche Bank For $850 Million Rights Offering
MONTREAL, April 26 /CNW Telbec/ - Air Canada announced today that it has
reached an agreement in principle with Deutsche Bank AG to amend the Stand-By
Purchase Agreement to extend and increase the rights offering available to
creditors from $450 million to $850 million. The $850 million rights offering
is greater than the $700 million originally sought by the Company at the start
of the equity solicitation process in July 2003. The agreement is subject to
completion of appropriate documentation and Court approval.
"Air Canada's restructuring regains its momentum today with a vote of
confidence in our restructuring business plan from a major global financial
institution," said Air Canada CEO Robert Milton. "The agreement with Deutsche
Bank will provide a solid foundation for Air Canada's restructuring and the
flexibility to pursue an equity partner as we work towards a successful
completion of the restructuring in the coming months.
"Air Canada is well positioned to carry on business effectively and it is
business as usual for our customers. We have made significant progress in
revenue, fleet and cost restructuring over the past year and our 2004 revenues
are tracking in line with what we projected in our business plan. We are now
entering our strongest travel period of the year, with positive cash flow and
approximately $1 billion in cash on hand as of the close of business last week
in addition to $500 million in available credit lines unchanged from the most
recent update.
"Our stakeholders, including our largest creditors, have reaffirmed their
support in ensuring the airline's successful restructuring and will continue
to work with us to ensure Air Canada emerges from CCAA protection a much
stronger airline," said Mr. Milton.
Under the proposed amendments, the previously announced $450 million
rights offering to creditors will be expanded to $850 million at the same
$925 million pre-investment valuation of Air Canada as had been provided in
the Trinity Agreement thus preserving and expanding a key element of potential
creditor recovery in Air Canada's restructuring plan.
Deutsche Bank as Stand-by Purchaser will acquire any equity not purchased
by creditors at a premium price of 107.5% thus ensuring that AC will have the
full $850 million available to fund its restructuring plan.
Air Canada will pursue an equity solicitation process. However, as a
result of the funding that the proposed amendments will secure, Air Canada
will be seeking only $250 million instead of the $650 million provided for in
the Trinity Agreement. This equity will be used in part to retire the GE
convertible notes and warrants if appropriate arrangements can be negotiated
with GE similar to those formerly negotiated by Trinity. However, successful
completion of the proposed equity investment will no longer be a condition
precedent to Air Canada's successful emergence from CCAA.
In addition to documentation and Court approval, the proposed amendments
contain two significant conditions regarding labour and pension matters which
must be satisfied by May 15, 2004. The labour condition requires that Air
Canada obtain $200 million in annual cost reductions to realize the labour
cost savings of approximately $1.1 billion agreed to by the various Air Canada
unions last year. In addition, the agreement requires that Air Canada's labour
unions provide "clean slate" assurances that all material disputes or claims
will be compromised or waived upon emergence. The pension conditions require
Air Canada to reach satisfactory arrangements with the Office of the
Superintendent of Financial Institutions (OSFI) to implement the February 18,
2004 agreement between Air Canada and its pension beneficiaries regarding
funding over 10 years of the solvency deficit in Air Canada's pension plans.
The proposed amendments do not require pension design changes as had
previously been required by equity plan sponsors.
In addition, the agreement requires satisfactory assurances from the
Government of Canada that, upon emergence, Air Canada will be able to compete
on a level playing field with all Canadian carriers in regards to the
regulatory environment.
The timeline for the equity solicitation process remains under discussion
and will be subject to approval by the Court. However, the amended agreement
will provide for Air Canada to emerge from CCAA protection no later than
September 30, 2004.
:ok:
MONTREAL, April 26 /CNW Telbec/ - Air Canada announced today that it has
reached an agreement in principle with Deutsche Bank AG to amend the Stand-By
Purchase Agreement to extend and increase the rights offering available to
creditors from $450 million to $850 million. The $850 million rights offering
is greater than the $700 million originally sought by the Company at the start
of the equity solicitation process in July 2003. The agreement is subject to
completion of appropriate documentation and Court approval.
"Air Canada's restructuring regains its momentum today with a vote of
confidence in our restructuring business plan from a major global financial
institution," said Air Canada CEO Robert Milton. "The agreement with Deutsche
Bank will provide a solid foundation for Air Canada's restructuring and the
flexibility to pursue an equity partner as we work towards a successful
completion of the restructuring in the coming months.
"Air Canada is well positioned to carry on business effectively and it is
business as usual for our customers. We have made significant progress in
revenue, fleet and cost restructuring over the past year and our 2004 revenues
are tracking in line with what we projected in our business plan. We are now
entering our strongest travel period of the year, with positive cash flow and
approximately $1 billion in cash on hand as of the close of business last week
in addition to $500 million in available credit lines unchanged from the most
recent update.
"Our stakeholders, including our largest creditors, have reaffirmed their
support in ensuring the airline's successful restructuring and will continue
to work with us to ensure Air Canada emerges from CCAA protection a much
stronger airline," said Mr. Milton.
Under the proposed amendments, the previously announced $450 million
rights offering to creditors will be expanded to $850 million at the same
$925 million pre-investment valuation of Air Canada as had been provided in
the Trinity Agreement thus preserving and expanding a key element of potential
creditor recovery in Air Canada's restructuring plan.
Deutsche Bank as Stand-by Purchaser will acquire any equity not purchased
by creditors at a premium price of 107.5% thus ensuring that AC will have the
full $850 million available to fund its restructuring plan.
Air Canada will pursue an equity solicitation process. However, as a
result of the funding that the proposed amendments will secure, Air Canada
will be seeking only $250 million instead of the $650 million provided for in
the Trinity Agreement. This equity will be used in part to retire the GE
convertible notes and warrants if appropriate arrangements can be negotiated
with GE similar to those formerly negotiated by Trinity. However, successful
completion of the proposed equity investment will no longer be a condition
precedent to Air Canada's successful emergence from CCAA.
In addition to documentation and Court approval, the proposed amendments
contain two significant conditions regarding labour and pension matters which
must be satisfied by May 15, 2004. The labour condition requires that Air
Canada obtain $200 million in annual cost reductions to realize the labour
cost savings of approximately $1.1 billion agreed to by the various Air Canada
unions last year. In addition, the agreement requires that Air Canada's labour
unions provide "clean slate" assurances that all material disputes or claims
will be compromised or waived upon emergence. The pension conditions require
Air Canada to reach satisfactory arrangements with the Office of the
Superintendent of Financial Institutions (OSFI) to implement the February 18,
2004 agreement between Air Canada and its pension beneficiaries regarding
funding over 10 years of the solvency deficit in Air Canada's pension plans.
The proposed amendments do not require pension design changes as had
previously been required by equity plan sponsors.
In addition, the agreement requires satisfactory assurances from the
Government of Canada that, upon emergence, Air Canada will be able to compete
on a level playing field with all Canadian carriers in regards to the
regulatory environment.
The timeline for the equity solicitation process remains under discussion
and will be subject to approval by the Court. However, the amended agreement
will provide for Air Canada to emerge from CCAA protection no later than
September 30, 2004.
:ok: