Air Canada 2009 Annual Report Download - page 109

Consolidated Financial Statements and Notes
109
(l) As at December 31, 2008, the Corporation was a party to a $100 senior secured revolving credit facility (the “Revolving
Credit Facility”). The Revolving Credit Facility had a one year term that could 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 total
amount available for borrowing under the Revolving Credit Facility was 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 Revolving Credit Facility were $50. The Revolving Credit Facility was secured by
a fi rst 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 fi rst priority charge and hypothec over certain owned and
leased real property of Air Canada. Air Canada’s obligations were guaranteed by 1209265 Alberta Ltd., a subsidiary
of Air Canada, which provided a fi rst 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 Revolving Credit Facility
contained customary representations and warranties and was subject to customary terms and conditions (including
negative covenants, fi nancial covenants and events of default). Financial covenants required the Corporation to
maintain, as of the last business day of each month, a minimum liquidity level of $900, which included the unused
and available commitment under the facility, and an interest coverage ratio test determined as at the end of each
fi scal quarter. During the second quarter, the fi nancial covenant that required the Corporation to maintain as of the
last business day of each month a minimum cash level of $900 including the unused and available commitment under
the facility was reduced to $800. The interest rate margin for drawn amounts was, at the option of Air Canada, prime
plus 13.00% or bankers’ acceptances plus 14.00%. As discussed in Note 1C, in connection with the entering into of
the Credit Facility described in (d), the Revolving Credit Facility was repaid in full in the amount of $49 during 2009.
The rights of the lender under this Revolving Credit Facility were assigned to the lenders under the Credit Facility.
(m) As at December 31, 2009, the principal outstanding is $17 on four CRJ aircraft ($25 as at December 31, 2008).
Principal and interest are paid quarterly to maturity in 2012. The fi nancing bears interest at a fl oating rate of the
3 month Canadian bankers’ acceptance rate plus 1.7%. The fi nancing can be repaid at any time, in whole or in part,
with the payment of applicable fees. The loan is secured by the aircraft with a carrying value of $23.
(n) US$16 principal outstanding to mature in 2015 (US$20 as at December 31, 2008), with quarterly repayments, at a
fl oating interest rate equal to the six month LIBOR rate plus 2.75% pre-payable on any interest payment date after
September 21, 2009, without the payment of applicable fees. The next interest payment date is March 20, 2010.
The debt is secured primarily by certain fl ight training equipment with a current carrying value of $33.
(o) As at December 31, 2008, US$13 principal outstanding which matured in 2009, with semi-annual repayments, at a
fi xed interest rate of 4.50% plus an annual 2.0% guarantee fee.
(p) Capital leases, related to facilities and 40 aircraft, total $904 ($83 and US$784) ($1,082 ($84 and US$815) as at
December 31, 2008). The debt has a weighted average effective interest rate of approximately 8% and fi nal maturities
range from 2010 to 2033. During 2009, the Corporation recorded interest expense on capital lease obligations of
$102 (2008 - $94).
Certain aircraft lease agreements contain a fair value test, beginning on July 1, 2009, and annually thereafter until lease
expiry. This test relates to 24 aircraft under lease of which 23 are accounted for as capital leases and the remainder
relates to leasing entities that are consolidated under AcG-15. Under the test, the Corporation may be required to
prepay certain lease amounts or to provide additional collateral, based on aircraft fair values, as of the date of the
test. Any amounts prepaid would be recorded as a reduction of the lease obligation. The Corporation contracts with
certain third parties to provide residual value support for certain aircraft. If the Corporation is required under the
loan to value test to prepay lease obligations, these amounts are recoverable from the third party residual value
support provider upon lease expiry to the extent that the adjusted obligation taking into account prepayments
is less than the residual value support. The maximum amount payable on July 1, 2010, assuming the related aircraft
are worth nil, is $599 (US$572). The maximum payable amount declines over time to nil upon lease expiry. In
July 2009 additional collateral of $8 in the form of cash deposits were made under the fair value test. As the Corporation
does not expect to have to prepay any signifi cant amounts based upon expectations of aircraft fair values into the future,
the amortized cost of these capital lease obligations refl ects the scheduled payments over the term to fi nal maturity.
Interest paid on Long-term debt and capital leases in 2009 by the Corporation was $326 (2008 - $293).
Refer to Note 14 for the Corporation’s 5 year principal and interest repayment requirements as at December 31, 2009.