Fitch Ratings has assigned ratings of "BB-/RR2" to Air Canada's proposed Canadian dollar (C$) $300 million senior secured notes.
The issuer default rating (IDR) for Air Canada remains unchanged at "B' with a positive outlook, says Fitch.
Proceeds from the transaction, along with the proceeds from the proposed US$1 billion term loan facility announced last week (also rated "BB-/RR"), will be used to fund a tender for Air Canada's existing $900 million first-lien and $200 million second-lien high yield notes scheduled to mature in 2015 and 2016, respectively.
The existing notes are callable, says Fitch.
The new notes will feature a six-year maturity, the same as the proposed term loan.
Last week Air Canada also announced a new $100 million senior secured revolving credit facility ("BB-/RR2") which will have a four-year maturity. The transaction will extend the company's largest debt maturities out to 2019, which Fitch believes is "beyond" the expected peak in the carrier's capital spending for new aircraft.
The new notes and credit facilities will also likely feature "significantly lower" interest rates than the outstanding high yield notes. The transaction could also augment Air Canada's liquidity, according to Fitch.
The notes, along with the credit facilities, will be secured by a first priority lien on Air Canada's Pacific route authorities, accounts receivable, certain real estate, spare engines, ground equipment, as well as slots at LaGuardia, Heathrow, and Washington-Reagan.
Fitch notes this is the same collateral pool that secures Air Canada's existing secured notes, with the addition of 10 extra spare engines.