Air Canada out of the woods

[rotornut]

Air Canada gets green light


By ROMA LUCIW and BRENT JANG
Globe and Mail Update


UPDATED AT 1:39 PM EDT Tuesday, Aug 17, 200

Air Canada's creditors gave the green light Tuesday to a new business plan that will allow the carrier to emerge from 17 months of bankruptcy protection.

The vote was 99.6 per cent in favour of the plan, Air Canada said. It paves the way for the delisting of the insolvent airline's shares and the creation of a leaner, restructured company.

“This positive response from creditors represents by far the most critical vote of confidence in the strength of our business plan and the airline's prospects going forward,” CEO Robert Milton said in a statement. “This crucial milestone of our restructuring is now behind us, and we look forward to the plan's approval by the court and the completion of our restructuring at the end of September.”

More than 100 creditors, bondholders, suppliers and union representatives took part in the meeting, which was presided over by Ernst & Young, the court-appointed monitor under the Companies' Creditors Arrangement Act. The morning-long session took place at the Fairmont Queen Elizabeth hotel in Montreal, where Air Canada is headquartered.

In what could have far-reaching implications for Canada's largest carrier, Air Canada's creditors will own a majority of the airline's shares, perhaps as much as 88 per cent, after it emerges from bankruptcy protection.

Air Canada's creditors will get a 45.8-per-cent stake in the revamped airline and have the right to acquire another 42-per-cent interest underwritten by Deutsche Bank AG of Germany.

Air Canada Enterprises Aviation Holdings Inc. is set to become the parent of Air Canada at the end of September, when the beleaguered carrier is scheduled to emerge from bankruptcy protection.

Under an $850-million rights offering backed by Deutsche Bank AG, creditors will have the opportunity to acquire an additional 42 per cent of shares in ACE.

Air Canada stock is expected to stop 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 Air Canada.

Creditors will recover around or just under 10 cents on each dollar that they are owed by receiving shares in the restructured airline's new holding company, ACE. Those will be issued at a value of $20 each.

Existing Air Canada shareholders will be left empty-handed after the reorganization is completed, since the company's stock will be worth next to nothing.

Loaded with debt and high operating costs, Air Canada filed for bankruptcy last year. It has been protected from creditors under the Companies' Creditors Arrangement Act (CCAA) since April, 2003.

In order to compete with discount rivals WestJet Airlines Ltd. and Jetsgo Corp., Air Canada wrestled $1.1-billion in wage and benefit concessions from workers and pared debt. The airline has also cut hundreds of millions of dollars in supplier costs, interest payments and aircraft rent.

Now that the restructuring plan has been approved by Air Canada's creditors, it must now get the go-ahead from the Ontario Superior Court on Monday.

[74tweaker]

While this is a major step forward - they are by no means free and clear. They still have a ways to go, but I'm sure they'll get there.

I wonder if there will be a class action lawsuit from all the smaller creditors who didn't get anything?

[lead zeppelin]

Air Canada Stock Plummets on Review
Wednesday August 18, 1:16 pm ET


MONTREAL (Reuters) - Shares of Air Canada (Toronto:AC.TO - News) fell by more than half on Wednesday, after the Toronto Stock Exchange said it was reviewing the company's stock to determine if it meets listing requirements.

The exchange said it is reviewing Air Canada's common shares and class A nonvoting shares on an expedited basis, which generally takes about two weeks.

The exchange declined to elaborate on the specifics of the review, but expectations are that Air Canada's shares will be delisted once the airline obtains court approval of its restructuring plan.

Air Canada's common shares tumbled 15.5 Canadian cents or 52.5 percent to 14 Canadian cents shortly after the opening on Wednesday, before clawing back to 17.5 Canadian cents at midday. A volume of more than 16.6 million shares made it the top traded stock.

Air Canada's share price, which topped C$20 in mid-2000, eroded as its fortunes dwindled with the falloff in business air travel in early 2001 and a slump in overall passenger traffic after the hijacked airliner attacks against the United States in September that year.

Burdened by deep losses and some C$12 billion of debt and other obligations, Air Canada obtained court protection from its creditors on April 1, 2003.

On Tuesday, the company's creditors approved its restructuring plan, which if approved by the court overseeing its bankruptcy protection process, would reduce the value of its current common stock to virtually zero.

Under the plan, creditors could end up owning as much as 88 percent of the airline, but its current common shares will have no value, according to Air Canada documents.

Expectations are that, after court approval of the restructuring plan, Air Canada's current stock will be eliminated and delisted from the Toronto exchange.

Air Canada, the dominant domestic carrier and world No. 11, hopes to exit bankruptcy protection at the end of September as a leaner, profitable airline. The carrier has already slashed its work force to 30,000 from more than 40,000 and obtained C$1.1 billion in contract concessions from unions representing its employees.

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[bean_counter]

AC as an investment ?

oooh yes please, but only if I have enough cash left after I've invested in United, US Air, Delta and BA............

I'm going to be rich I tell you, rich :ok:

[skibeagle]

As I understand it, all of the creditors are entitled to a slice of the pie. If the Summer turns out to be crapper than expected (likely due to higher fuel prices), I wonder if the creditors will take up the offer of the $850 million loan from Germany ? Maybe it will appear to be good money after bad ? The risk-shift at the next creditors meeting would make excellent MBA thesis fodder !!!

Out of the woods - not by a very long chalk - IMHO

[74tweaker]

All the creditors that are owed $20,000 or more will get about 9 cents to the dollar - everyone else is out of luck! That's a lot of people and smaller businesses.

[Iron City]

The best way to have a million $ (C or otherwise) from aviation is to start out with $2Million

Maybe you can by shares like NAVCANADA by setting up as a federally chartered nonstock corporation financed with loans backed by the Canadian government eh?