Davies acted for Canada Enterprise Emergency Funding Corporation, a non-agent Crown corporation and wholly owned subsidiary of Canada Development Investment Corporation.
Air Canada and the Government of Canada have entered into a series of debt and equity financing agreements that will allow Air Canada to access up to approximately $6 billion in liquidity through the Large Employer Emergency Financing Facility (LEEFF) program, which was created to help sustain companies through the COVID-19 pandemic.
As part of the agreements, Canada’s largest domestic and international airline has made certain commitments to refund customers, resume service to nearly all regional communities where service was suspended due to the pandemic, maintain its workforce at or above April 1, 2021, levels and complete the purchase of 33 Airbus A220 aircraft manufactured at Airbus’s Mirabel facility in Québec. The agreements also restrict Air Canada’s ability to pay dividends, make share buybacks and make certain capital expenditures. Consistent with the LEEFF program, there are also restrictions on compensation payable to certain Air Canada senior executives.
The financial package provides for fully repayable loans that Air Canada would only draw down as required, as well as an equity investment, and is comprised of: gross proceeds of $500 million for Air Canada shares at a price of $23.1793 per share; $1.5 billion in the form of a secured revolving credit facility at a 1.5% premium to the Canadian Dollar Offered Rate (CDOR); the facility is secured on a first lien basis by the assets of Aeroplan Inc., Air Canada’s shares in Aeroplan as well as certain assets of Air Canada, including certain intellectual property relating to the Aeroplan loyalty program; $2.475 billion in the form of three unsecured non-revolving credit facilities of $825 million each with: the first, five-year tranche at a 1.75% premium to CDOR per annum; the second, six-year tranche at 6.5% per annum (increasing to 7.5% after 5 years); and the third, seven-year tranche at 8.5% per annum (increasing to 9.5% after 5 years). As part of the financial package, Air Canada issued an aggregate of 14,576,564 warrants exercisable for the purchase of an equal number of Air Canada shares, subject to customary adjustments, at a price of $27.2698 per share during a 10-year term, representing 10% of the total commitment available under the above secured and unsecured credit facilities; 50% of the warrants vested concurrently with the implementation of the credit facilities and the remaining 50% of the warrants will vest on a proportional basis to the amounts that Air Canada may draw under the above unsecured credit facilities; up to approximately $1.4 billion in the form of an unsecured credit facility tranche to support customer refunds of non-refundable tickets. The facility will have a seven-year term and carry an annual interest rate of 1.211%.
The Davies team that advised on the transaction included Anthony Spadaro (Picture), Jennifer Prieto, Carol Pennycook, Denis Ferland, Sébastien Thériault, Elise Beauregard, Diana Bahous and Talya Kornitzer (Banking and Finance); and Vincent Mercier, David Wilson, Daniel Pearlman and Joseph DiPonio (Capital Markets).
Involved fees earner: Diana Bahous – Davies Ward Philips & Vineberg; Elise Beauregard – Davies Ward Philips & Vineberg; Joseph DiPonio – Davies Ward Philips & Vineberg; Denis Ferland – Davies Ward Philips & Vineberg; Talya Kornitzer – Davies Ward Philips & Vineberg; Vincent Mercier – Davies Ward Philips & Vineberg; Daniel Pearlman – Davies Ward Philips & Vineberg; Carol Pennycook – Davies Ward Philips & Vineberg; Jennifer Prieto – Davies Ward Philips & Vineberg; Anthony Spadaro – Davies Ward Philips & Vineberg; Sébastien Thériault – Davies Ward Philips & Vineberg; David Wilson – Davies Ward Philips & Vineberg;
Law Firms: Davies Ward Philips & Vineberg;