Air Canada 2009 Annual Report Download - page 143

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Consolidated Financial Statements and Notes
143
Aveos Restructuring Plan
On January 26, 2010, Aveos reached an agreement with its lenders and equity holders on the terms of a consensual
restructuring plan to recapitalize the company. As part of this recapitalization, Air Canada and Aveos entered into a
preliminary agreement to settle certain issues and modify the terms of certain contractual arrangements in exchange for
Air Canada receiving a minority equity interest in Aveos. The modifi ed terms relating to the maintenance agreements are
not expected to have a material impact on maintenance expense over their terms.
Closing of Aveos’ recapitalization, including the related transactions between Air Canada and Aveos, is subject to completion
of formal documentation and other conditions and is expected to occur during the fi rst quarter of 2010. As part of these
agreements, the Corporation would also agree to extend repayment terms on $22 of receivables (described above under
Agreement with Aveos on Revised Payment Terms), due in 2010, over six years with annual repayments on a non-interest
bearing basis, with such payments subject to satisfaction of certain conditions.
The terms of the Pension and Benefi ts Agreement (described above) would also be modifi ed to defer the determination
of pension assets and related solvency defi ciencies of transferring unionized employees performing airframe maintenance
services to April 2011. This would have the result of Air Canada assuming changes in the solvency defi ciency for those
affected employees from the date of the Pension and Benefi ts Agreement to the date of their transfer to Aveos, scheduled
for April 2011. As part of the amendment, all letters of credit issued under the Pension and Benefi ts Agreement would be
cancelled and a new letter of credit in a maximum amount of $20 would be issued by Air Canada in favour of Aveos to
secure the payment of all compensation payments owing by Air Canada to Aveos in respect of pension, disability, and retiree
liabilities for which Air Canada is liable under the PBA. This modifi cation would result in a reduction to the outstanding
deposit under Air Canada’s letter of credit facility of approximately $20 in the fi rst quarter of 2010.
The accounting for the above agreements will be determined upon closing.
The Relationship between the Corporation and ACE
Term Credit Facility
ACE is a participant lender in the Credit Facility as described in Note 6. ACE’s participation in the Credit Facility represents
$150 of the outstanding loan of $600 as at December 31, 2009. The participant lenders participate on a pro-rata basis with
respect to any warrants and principal and interest payments. ACE’s pro-rata share of interest expense reported during the
year amounts to $8 and its pro-rata share of the warrants as reported in Contributed surplus is approximately $2.
Master Services Agreement
Air Canada provides certain accounting and administrative services to ACE in return for a fee. ACE terminated the majority
of these service agreements in 2009.