Air Canada 2008 Annual Report Download - page 110

2008 Air Canada Annual Report
110
2009 an additional $46 (US$37) principal and 22 engines were added under the original agreement with the same
terms as described above.
(f) US$80 principal outstanding to mature in 2014, with quarterly repayments, at a floating interest rate equal to the
three month LIBOR rate plus the lenders incremental cost of funds rate and a margin of 3.00%. The loan is secured
by spare parts and other assets with a carrying value of $295. The loan agreement contains a collateral value test,
performed on a monthly basis. This test relates to all inventory collateral and the Corporation may be required to
provide additional inventory collateral, cash collateral, letters of credit, prepay some of the loan or any combination
of the above based on appraised values, as of the date of the test. Any amounts prepaid would be recorded as a
reduction of the loan. This amount declines over time to nil upon the loan expiry. In January 2009 an additional $92
(US$75) principal was added under the original agreement with the same terms as described above.
(g) US$13 principal outstanding to mature in 2009, with semi-annual repayments, at a fixed interest rate of 4.50% plus
an annual 2.0% guarantee fee.
(h) US$20 principal outstanding to mature in 2015, with quarterly repayments, at a floating interest rate equal to the six
month LIBOR rate plus 2.75% pre-payable on any interest payment date after December 23, 2007. The next interest
payment date is March 20, 2009. The debt is secured by certain flight training equipment with a current carrying
value of $39.
(i) The revolving credit facility is a $100 senior secured revolving credit facility (the “Credit Facility”). The Credit
Facility has a one year term that can be extended at Air Canada’s request for additional one-year periods on each
anniversary of the closing, subject to prior approval of the lenders. The Credit Facility replaces Air Canada’s previous
secured syndicated three year revolving credit facility, which was a $400 facility as of December 31, 2007. The total
amount available for borrowing under the Credit Facility is subject to a borrowing base restriction based on certain
percentages of the values of eligible accounts receivable and eligible real property. As at December 31, 2008, the
funds available under the Credit Facility were $50. The Credit Facility is secured by a first priority security interest
and hypothec over the present and after-acquired personal property of Air Canada, subject to certain exclusions
and permitted liens, and by a first priority charge and hypothec over certain owned and leased real property of Air
Canada. Air Canada’s obligations are guaranteed by 1209265 Alberta Ltd., a subsidiary of Air Canada, which provides
a first priority security interest over its present and after-acquired personal property, subject to certain exclusions
and permitted liens, as security for its guarantee obligations. The Credit Facility contains customary representations
and warranties and is subject to customary terms and conditions (including negative covenants, financial covenants
and events of default). Financial covenants require the Corporation to maintain, as of the last business day of each
month, a minimum liquidity level of $900, which includes the unused and available commitment under the facility,
and an interest coverage ratio test determined as at the end of each fiscal quarter. The interest rate margin for drawn
amounts is, at the option of Air Canada, prime plus 13.00% or bankers’ acceptances plus 14.00%.
(j) As at December 31, 2008, the principal outstanding is $25 on four CRJ aircraft (2007 - $33). Principal and interest are
paid quarterly to maturity in 2012. The financing bears interest at a floating rate of the 3 month Canadian bankers’
acceptance rate plus 1.7%. The loan is secured by the aircraft with a carrying value of $26.
(k) During 2008, the Corporation arranged for and received financing amounting to $190 (US$155). The first payment
of US$80 matured and was repaid in January 2009. The remainder of the financing has a term to December 15,
2009 and is repayable prior to then provided the Corporation has received certain additional alternate financing. The
financing bears interest at one month LIBOR plus 5.98% (currently 6.45%) and is secured by a security interest and
a movable hypothec in the principal amount of $400. The financing can be repaid at any time prior to maturity, in
whole or in part, without penalty.
(l) On October 30, 2007, the Corporation entered into an agreement with a syndicate of banks for the financing of pre-
delivery payments (“PDP”) for 10 of the 16 Boeing B777 aircraft contemplated in the Boeing Purchase Agreement.
The PDP financing is a series of loans that are aircraft specific with a maximum aggregate commitment of up to $568
(US$575). The PDP loans have a term of five years, but may be prepaid upon the delivery of the aircraft without
penalty. During 2008, the Corporation drew $39 (US$39) (2007 - $585 (US$592)). The Corporation prepaid $516
(US$501) towards 8 aircraft during 2008 (2007 - $64 (US$65) toward one aircraft). In addition, the Corporation
has served notice to the PDP syndicate that it will be repaying the final PDP loan on delivery of the tenth aircraft