Air Canada Completes $1.075B Private Offering of Senior Secured Notes

On August 3, 2010, Air Canada completed private offerings of senior secured notes, consisting of US$600-million principal amount of 9.25 per cent senior secured first lien notes due 2015 and $300-million principal amount of 10.125 per cent senior secured first lien notes due 2015 (collectively, the “First Lien Notes”), and US$200-million principal amount of 12 per cent senior secured second lien notes due 2016 (the “Second Lien Notes”).

Air Canada received net proceeds of $1.075 billion, after deduction of fees, expenses and discounts, and used approximately $729 million of the net proceeds of the offerings to repay all of the outstanding indebtedness under its existing secured term credit facility.

The First Lien Notes are senior secured obligations of Air Canada, secured on a first-lien basis by accounts receivable, certain real estate interests, certain spare engines, ground 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.

The terms of the Second Lien Notes are substantially similar to the terms of the First Lien Notes, except that the Second Lien Notes are effectively junior to the First Lien Notes. J.P. Morgan and TD Securities acted as joint book-running managers for the offering of the First Lien Notes, while Morgan Stanley and Citi acted as co-managers. J.P. Morgan acted as sole book-running manager for the offering of the Second Lien Notes, while Crédit Agricole CIB, TD Securities, HSBC, National Bank Financial and Canaccord Genuity acted as co-managers.

Air Canada was represented in-house by David Shapiro, Vice President and General Counsel; Arielle Meloul-Wechsler, Assistant General Counsel and Director of Legal Services; David Perez, Assistant General Counsel, Corporate and Commercial; Jeffrey Wood, Senior Counsel, Commercial; Anna Maria Masciotra, Senior Counsel, Commercial and Aircraft Finance; Daniel Magny, Counsel, Regulatory and International and Valérie Durand, Counsel, Commercial, and assisted by Stikeman Elliott LLP, with a team that included Sterling Dietze, Robert Carelli, Howard Rosenoff, Kenton Rein, David Massé, Gabrielle Bélanger, Aniko Pelland, Laura Salvati, David Tardif and Kevin Custodio (corporate finance); Marie-Andrée Beaudry and Frank Mathieu (tax) and Brenda Hebert, Douglas Klaassen and Valérie Mac-Seing (real estate). Skadden, Arps, Slate, Meagher & Flom LLP was US counsel to Air Canada, with a team composed of Christopher Morgan, Ryan Dzierniejko, Terence Trinh, Sarah Ward and Daniel Micak (corporate finance); Eric Sensenbrenner and Daniel McCall (tax) and Elizabeth Malone (environmental).

The initial purchasers were represented in Canada by Davies Ward Phillips & Vineberg LLP, with a team that included Richard Cherney, Neil Kravitz, Sébastien Thériault, Olivier Désilets, Brian Kujavsky and Sylvie Guillemette (corporate finance). Cravath, Swaine & Moore LLP acted as US counsel to the initial purchasers, with a team composed of Eric Schiele, Mile Kurta, Johnny Skumpija and Elizabeth Gottshall (corporate finance) and Matthew Morreale (environmental).