FlyerTalk Forums - View Single Post - Air Canada plans $900-million private offering to repay credit facility

Jul 29, 2010 | 7:15 am

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tcook052

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http://www.financialpost.com/Canada+...142/story.html

They went looking for $900-million of high-yield debt and ended up with $1.1-billion on more attractive terms than their previous $700-million credit facility.

By any measure, that transaction by Air Canada is a major success. Not only did the issuer raise more capital, it did so on more attractive terms. The blended interest rate on the new borrowings is just over 10%, which compares favourably with the minimum 12.75% required under the facility put in place last July with four non-bank lenders. And the issuer has also been able to extend term. The $700-million fully drawn facility was set to mature in July 2014; now the bulk of the issue won't have to be paid off until August 2015.

"It was a very interesting and successful deal," said one market participant, who added Air Canada made a little history with the collateral used to support the borrowings. The deal marks the first time a Canadian airline has been able to use its Pacific route rights and gate slots (at La Guardia and Heathrow as collateral) for a capital markets borrowing. (Other assets, including real estate, were also used as part of the $2-billion collateral.)

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