Air Canada prices $1.4bn refinancing

Washington DC
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Air Canada has priced its about $1.4 billion senior secured refinancing, achieving rates up to 525bp lower than those on its outstanding debt and pushing out maturities until the end of the decade.

The Montreal-based carrier’s $400 million first lien notes due 2019 priced at 6.75%, the Canadian dollar (C$) 300 million ($291.6 million) first lien notes due 2019 at 7.625% and the $300 million second line notes due 2020 at 8.75% though a private placement, it says.

“The markets are fairly strong,” said Michael Rousseau, chief financial officer of Air Canada, on the private placement at an investor conference on 18 September. “So we took full advantage of them.”

Lenders have provided commitments for a $300 million senior secured term loan with a six-year tenor and a $100 million revolving credit facility with a four-year tenor, according to the airline.

JP Morgan is lead bookrunner on the US dollar denominated notes and TD Securities is lead on the Canadian dollar notes. Citi is the lead on the term loan and revolver.

The deal is scheduled to close on 26 September.

Proceeds will be used to repay the outstanding principal of Air Canada’s $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 notes due 2016. This includes a separate cash tender for the outstanding notes.

Holders of the debt redeemed about 94% of the outstanding principal under an early tender offer by 18 September.

The remaining proceeds will be used for working capital and general corporate purposes, says Air Canada.