Transaction would:

• reduce outstanding indebtedness by approximately C$355 million
• generate annualized interest expense savings of approximately C$60 million
• increase unencumbered assets by C$650 million to approximately C$2 billion

MONTREAL, Sept. 26, 2016 /CNW Telbec/ - Air Canada announced today that it has priced a private offering of senior secured notes and received commitments from lenders for a new credit facility in connection with its C$1.25 billion refinancing transaction.

As part of its refinancing transaction, Air Canada entered into a purchase agreement with a syndicate of initial purchasers relating to a private offering of C$200 million aggregate principal amount of 4.75% senior secured first lien notes due 2023 (the "2016 Senior Notes"), which will be sold at par. Air Canada also received loan commitments for a U.S.$800 million term loan, maturing in 2023, together with a new, undrawn U.S.$300 million revolving credit facility expiring in 2021 (collectively with the term loan, the "2016 Credit Facility"). The 2016 Credit Facility has an initial interest rate of 275 basis points over LIBOR (subject to a LIBOR floor of 75 basis points). The 2016 Credit Facility and the offering of the 2016 Senior Notes are each expected to close on October 6, 2016, subject to customary closing conditions.

Air Canada intends to use the net proceeds from the sale of the 2016 Senior Notes, together with borrowings under the term loan under the 2016 Credit Facility, and approximately C$444 million of cash on hand, to pay the redemption price for all of Air Canada's outstanding senior secured notes (the "2013 Secured Notes"), and to repay Air Canada's outstanding U.S.$300 million term loan.  The 2013 Secured Notes are subject to Air Canada's previously announced conditional notices of redemption. Air Canada has not called for redemption any of its 7.750% senior unsecured notes due 2021.

Subject to closing these transactions, on the basis of current interest rates and Canada-U.S. dollar exchange rates, Air Canada's outstanding indebtedness would decrease by approximately C$355 million, its weighted average cost of capital would decrease by approximately 150 basis points, to 4.49%, since the end of Q2 2013 and Air Canada would realize annualized interest expense savings of approximately C$60 million. These transactions would also represent an increase in Air Canada's undrawn revolving credit facility of U.S.$90 million, to an amount of U.S.$300 million, and result in the release of liens in respect of assets with an estimated value of approximately C$650 million, bringing the total estimated value of Air Canada's unencumbered assets to approximately C$2 billion at closing.

Other than the principal amount of the 2016 Senior Notes which are denominated in Canadian dollars, Canadian dollar figures identified in this news release are based on an exchange rate of C$1.00 equal to U.S.$0.7596. Air Canada's outstanding indebtedness, weighted average cost of capital and interest expense are dependent on a number of factors, risks and uncertainties, including fluctuations in interest rates and the Canada-U.S. dollar exchange rate, both of which have varied significantly over the last several years and may continue to fluctuate. Please see section below entitled "Caution Regarding Forward-Looking Information".

The 2016 Senior Notes and Air Canada's obligations under the 2016 Credit Facility will be senior secured obligations of Air Canada, secured on a first lien basis, subject to certain permitted liens and exclusions, by certain real estate interests, ground service equipment, certain airport slots and gate leaseholds, and certain Pacific routes and the airport slots and gate leaseholds utilized in connection with these Pacific routes.

General

The 2016 Senior Notes will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and state securities laws. The 2016 Senior Notes will be offered and sold only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act, and to persons other than U.S. persons in transactions outside the United States in reliance on Regulation S under the Securities Act.

The 2016 Senior Notes will not be qualified for sale to the public under applicable Canadian securities laws and, accordingly, any offer and sale of the 2016 Senior Notes in Canada will be made on a basis that is exempt from the prospectus requirement of such securities laws. The 2016 Senior Notes are being offered and sold on a private placement basis to accredited investors in certain provinces of Canada.

This press release shall not constitute an offer to sell the 2016 Senior Notes or the solicitation of an offer to buy the 2016 Senior Notes, nor will there be any sale of the 2016 Senior Notes in any state or jurisdiction where such offer, solicitation or sale is not permitted. The 2016 Senior Notes will be offered only through a preliminary and final offering memorandum and this press release is not intended to serve as the basis for any investment decision.

About Air Canada

Air Canada is Canada's largest domestic and international airline serving more than 200 airports on six continents. Canada's flag carrier is among the 20 largest airlines in the world and in 2015 served more than 41 million customers. Air Canada provides scheduled passenger service directly to 64 airports in Canada, 55 in the United States and 87 in Europe, the Middle East, Africa, Asia, Australia, the Caribbean, Mexico, Central America and South America. Air Canada is a founding member of Star Alliance, the world's most comprehensive air transportation network serving 1,330 airports in 192 countries. Air Canada is the only international network carrier in North America to receive a Four-Star ranking according to independent U.K. research firm Skytrax. For more information, please visit: www.aircanada.com, follow @AirCanada on Twitter and join Air Canada on Facebook.

CAUTION REGARDING FORWARD-LOOKING INFORMATION 

This news release includes forward-looking statements within the meaning of applicable securities laws. Forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements may involve, but are not limited to, statements regarding Air Canada's intention to complete the refinancing transaction, anticipated reduction in outstanding indebtedness, weighted average cost of capital, annualized interest expense, and increases in the value of unencumbered assets and related matters. Forward-looking statements are identified by the use of terms and phrases such as "preliminary", "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions.  

Forward-looking statements, by their nature, are based on assumptions, including those described herein and are subject to important risks and uncertainties. Forward-looking statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business. Actual results may differ materially from results indicated in forward-looking statements due to a number of factors, including without limitation, our ability to successfully achieve or sustain positive net profitability or to realize our initiatives and objectives, our ability to pay our indebtedness, reduce operating costs and secure financing, currency exchange, industry, market, credit, economic and geopolitical conditions, energy prices, competition, our ability to successfully implement strategic initiatives and our dependence on technology, war, terrorist acts, epidemic diseases, casualty losses, employee and labour relations, pension issues, environmental factors (including weather systems and other natural phenomena and factors arising from man-made sources), limitations due to restrictive covenants, insurance issues and costs, changes in demand due to the seasonal nature of the business, dependence on suppliers and third parties, including regional carriers, Aeroplan and the Star Alliance, changes in laws, regulatory developments or proceedings, pending and future litigation and actions by third parties and the ability to attract and retain required personnel, as well as the factors identified in section 17 "Risk Factors" of Air Canada's 2015 MD&A dated February 17, 2016 available at www.sedar.com. 

In particular, estimates regarding reductions in Air Canada's outstanding indebtedness, weighted average cost of capital and annualized interest expense, which were derived at on the basis of current interest and Canada-U.S. dollar exchange rates, are dependent on a number of factors, risks and uncertainties, including changes in prevailing interest rates (including LIBOR) and the Canada-U.S. dollar exchange rate, both of which have varied significantly over the last several years and may continue to fluctuate. Estimated values of unencumbered assets reflect the good faith estimate of management, and such values may be subject to fluctuation over time due to a number of factors beyond Air Canada's control. The contemplated refinancing transaction is subject to general market and other conditions and there are no assurances that it may be completed on terms favorable to Air Canada, or at all. 

The forward-looking statements contained in this news release represent Air Canada's expectations as of the date of this news release (or as of the date they are otherwise stated to be made), and are subject to change after such date. However, Air Canada disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.

SOURCE Air Canada