Air Canada's planned issue of about $1.4 billion in secured debt has received speculative grade ratings from Fitch Ratings, Moody's Investor Services and Standard & Poor's (S&P).
The bank debt is split between a $700 million first lien senior secured term loan, $100 million first lien revolving credit facility, C$300 million ($289.2 million) first lien secured notes and $300 million in second lien secured notes. The Montreal-based carrier plans to raise the funds through a private placement.
Fitch rates the first lien debt BB and the second lien BB-, Moody's the first lien B2 and the second lien Caa2, and S&P the first lien B+ and the second lien CCC+.
Proceeds of the debt will be used to repay the outstanding principal of its $600 million 9.25% senior secured notes due 2015, C$300 million 10.125% senior secured notes due 2015 and $200 million 12% senior second lien due 2016.
The $700 million term loan and C$300 million first lien notes have a tenor of six years, the $300 million second lien notes a tenor of 6.5 years and the revolver a tenor of four years, according to Fitch.
"The transaction will push the company's largest debt maturities out to 2019, beyond the middle of the decade when capital spending for new aircraft is expected to peak," says Fitch. It also anticipates lower interest rates on the new financing.
The debt is backed by the gates and slots of Air Canada's operations at London Heathrow, New York LaGuardia and Washington National airports, its Pacific route authorities as well as spare engines and property, according to Moody's.
The package is comparable to a previous $1.4 billion debt issue that the airline planned in June.
Air Canada launched the debt along with a cash tender for the outstanding notes on 6 September.