September is fast approaching and I've heard very little on the Air Canada bankruptcy front, or should I be polite and refer to it as the "restructuring" issue.
As far as I can tell, nobody is coming to the rescue. Is this the calm before the storm?
CGTSN
14th Aug 2004, 02:54
We will know by next week what is going on :
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&call_pageid=971358637177&c=Article&cid=1092348631580
rotornut
16th Aug 2004, 15:21
GLOBEANDMAIL.COM
Air Canada restructuring ready for take off
Creditors expected to overwhelmingly approve the creation of a revamped airline
By BRENT JANG
TRANSPORTATION REPORTER
UPDATED AT 11:18 AM EDT Monday, Aug 16, 2004
Creditors are expected tomorrow to approve Air Canada's restructuring plan to emerge from bankruptcy protection, clearing the way for the delisting of the insolvent company's shares and the creation of a revamped airline.
"You can expect an overwhelming vote in favour," said one creditor, who asked not to be named. "I can't imagine any major objections. Early on in the restructuring, there were lots of fights, but eventually, the creditors got what we wanted, which is a big rights offering."
If creditors at the Montreal meeting give the green light to the carrier's restructuring plan, they will pick up a 45.8-per-cent interest in Air Canada's new parent holding company named ACE Aviation Holdings Inc.
And under an $850-million rights offering, creditors will have the opportunity to acquire an additional 42 per cent of shares in ACE, which stands for Air Canada Enterprises.
The rights offering, expected by some observers to be a hot issue with strong demand from certain creditors, is backstopped by Germany's Deutsche Bank AG.
As well, New York vulture fund Cerberus Capital Management LP is poised to invest $250-million in new equity in the airline for a 9.2-per-cent stake, while a 3-per-cent interest will be allocated for management stock options.
Air Canada shares are expected to cease trading on or before Sept. 30, with delisting on the Toronto Stock Exchange occurring soon after.
ACE shares are set to be listed and available for trading as early as Sept. 30, after the rights are distributed, according to Montreal-based Air Canada.
Air Canada spokeswoman Priscille LeBlanc said airline officials "are encouraged by the input we've received from creditors to date. We are looking forward to a strong, positive response on Tuesday."
The airline has been protected from creditors under the Companies' Creditors Arrangement Act (CCAA) since April, 2003.
"It's an important event. It's probably close to the last hurdle in terms of getting details of the CCAA looked after," said Karl Moore, a business professor at McGill University in Montreal. "They are creditors and they have lost a lot of money. But the end result is they'll vote for the plan. They wouldn't get as much money from the alternatives like liquidation, which would be pretty ugly."
GE Capital Aviation Services of Stamford, Conn., has agreed to lend $1.8-billion, a key in providing Air Canada with the financial capital required to carry out the restructuring plan.
Prof. Moore said ACE shares are the consolation prize for a wide range of creditors who either loaned money to the airline or are owed money for supplies and services rendered. They will wind up with pennies on the dollar, likely in the neighbourhood of 10 cents.
Court-appointed monitor Ernst & Young pegs the total claims accepted or determined at $7.48-billion, assuming there won't be any appeals on court rulings.
Disputed claims total $1.46-billion, of which nearly $520-million has been allowed in part, as the claims process winds down.
There are a wide range of creditors, including aircraft lessors, bondholders, suppliers, financial institutions and unions. Just how many of those creditors will opt to retain their ACE shares remains to be seen. "Some will be short-term traders. It boils down to what you think is going to happen to Air Canada, what you think is going to happen to it in one or two years," Prof. Moore said.
Although the monitor and experts have indicated for months that existing Air Canada shareholders will be left empty-handed after the reorganization is completed, the company's stock has been briskly traded on the TSX. On Friday, Air Canada shares gained 1 cent to close at 39 cents, with 1.8 million shares changing hands.
Prior to July 31, creditors could vie for additional ACE rights by acquiring the debts of other creditors. Since that deadline has passed, however, creditors seeking to unload their claims now would have to find shoppers willing to buy ACE shares that lack the sweetener of accessing the rights offering.