Air Canada 2009 Annual Report Download - page 108

2009 Air Canada Annual Report
108
(f) During 2008, the Corporation arranged for and received fi nancing amounting to $190 (US$155). The fi rst payment of
US$80 matured and was repaid in January 2009. In July 2009, the maturity of the Term Loan due 2009 was extended
to December 2013. The fi nancing bears interest at one month LIBOR plus 5.98% (6.21% as at December 31, 2009
and 6.45% as at December 31, 2008) and is secured by a security interest and a movable hypothec in the principal
amount of $400. The fi nancing can be repaid at any time prior to maturity, in whole or in part, without the payment
of applicable fees.
(g) US$133 principal outstanding (US$142 as at December 31, 2008) on acquisitions of two A340-500 aircraft fi nanced
through conditional sales agreements. Principal and interest is paid quarterly until maturity in 2019. The purchase
price instalments bear interest at a three month LIBOR rate plus 2.9% (3.15% - 3.31% as at December 31, 2009
and 4.37% - 6.44% as at December 31, 2008). The fi nancing can be repaid at any time, in whole, with the payment
of applicable fees. The carrying value of the two A340-500 aircraft provided as security under the conditional sales
agreements is $212 as at December 31, 2009.
(h) The Corporation is the primary benefi ciary of certain Fuel Facility Corporations in Canada. The debts bear interest
at rates ranging from 2.15% to 5.09%. Of the total debts of $136, $104 relates to a bond payable at a fi xed rate of
interest of 5.09% which matures in 2032 with equal semi-annual payments of principal and interest. The remaining
debts have varying maturities. The debts are secured by a general security agreement covering all assets of the Fuel
Facility Corporations. The carrying value of the assets of the fuel facilities is $165 as at December 31, 2009.
(i) US$132 principal outstanding to mature in 2014 (US$80 as at December 31, 2008), with quarterly repayments, at
a fl oating interest rate equal to the three month LIBOR rate plus the lender’s incremental cost of funds rate and a
margin of 3.00%. The fi nancing can be repaid subsequent to the 36th monthly anniversary of the initial funding date,
in whole or in part, with the payment of applicable fees. The loan is secured by spare parts and other assets with a
carrying value of $265. 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. Financing fees totaling $6 were recorded in 2009 for these
additional borrowings.
(j) US$70 principal outstanding to mature in 2013 (US$78 as at December 31, 2008), with quarterly repayments and a
fi nal payment at maturity of 50% of the original principal, at a fl oating interest rate equal to the three month LIBOR
rate plus 3.40% as at December 31, 2009 (2008 – 5.13%). The fi nancing can be repaid at any time, in whole, with
the payment of applicable fees. The loan is secured by 10 spare engines with a carrying value of $113.
The loan agreement contains a current market value test, beginning on the fi rst anniversary of the facility, and
annually thereafter until expiry. This test relates to 10 engines and under the test, the Corporation may be required
to provide additional collateral or prepay certain facility amounts, based on engine current market values, as of the
date of the test. Any amounts prepaid would be recorded as a reduction of the loan. The maximum amount payable
in December 2010 on the next anniversary, assuming the engines are worth nil and no additional collateral has been
provided, is $65 (US$63). This amount declines over time to fi fty percent of the original principal upon the loan
expiry. In January 2009 an additional $46 (US$37) principal and 22 engines were added under the original agreement
with the same terms as described above. Financing fees totaling $2 were recorded in 2009 for these additional
borrowings. As discussed in Note 1C, the outstanding balance related to the additional fi nancing was repaid in 2009.
(k) On October 30, 2007, the Corporation entered into an agreement with a syndicate of banks for the fi nancing of
pre-delivery payments (“PDP”) for 10 of the 16 Boeing B777 aircraft contemplated in the Boeing Purchase Agreement.
The PDP fi nancing was a series of loans that are aircraft specifi c with a maximum aggregate commitment of up
to $568 (US$575). The PDP loans had a term of fi ve years, but could be prepaid upon the delivery of the aircraft
without penalty. During 2009, the Corporation drew nil (2008 - $39 (US$39)) and prepaid $83 (US$66) towards
1 aircraft ($516 ($US501) towards 8 aircraft during 2008). This was the fi nal repayment on the pre-delivery fi nancing.
At year-end 2009, the balance outstanding on the PDP loans was nil ($81 (US$66) as at December 31, 2008).
The 2009 capitalized interest relating to this fi nancing was nil (2008 - $10) at an interest rate of 30 day LIBOR plus
1.14% (1.61% as at December 31, 2008).