Air Canada 2009 Annual Report Download - page 107

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Consolidated Financial Statements and Notes
107
August 2010 of $30 with the fi nal instalment of $120 due in July 2014. Any increase to the facility would increase,
on a pro rata basis, the scheduled repayments, including the fi nal payment.
The Credit Facility bears interest at a rate based upon the greater of the bankers’ acceptance rate or 3.00% plus
9.75% (12.75% as at December 31, 2009). The Credit Facility can be repaid at any time, in whole or in part, with the
payment of applicable fees, subject to a minimum repayment of $10.
Air Canada’s obligations under the Credit Facility are secured by a fi rst priority security interest and hypothec
over substantially all the present and after-acquired property of Air Canada and its subsidiaries, subject to certain
exclusions and permitted liens. The Credit Facility contains customary representations and warranties and is subject
to customary terms and conditions (including negative covenants, fi nancial covenants and events of default).
Financial covenants require the Corporation to maintain, as of the last business day of each month, unrestricted cash
(as defi ned per the Credit Facility and generally based upon the aggregate sums of Cash and cash equivalents and
Short-term investments) of $800 and a minimum EBITDAR (earnings before interest, income taxes, depreciation,
amortization, aircraft rentals, certain non-operating income (expense) and special items) and an interest coverage
ratio test determined as at the end of each fi scal quarter.
A requirement of the Credit Facility is that the Corporation maintain at all times unrestricted cash in accounts subject
to securities control agreements equal to or greater than the lesser of (a) $800 and (b) 80% of unencumbered cash
subject to a minimum of $500. The securities in such accounts would become restricted if the Corporation defaults
on certain terms of the Credit Facility as described above.
Under the Credit Facility, Air Canada issued to the lenders, concurrently with the fi rst drawdown, warrants for the
purchase of Air Canada’s Class A Variable Voting Shares or Class B Voting Shares representing an aggregate of 5%
or 5 million of the total issued and outstanding shares as at the closing date of the Credit Facility, allocated among
the lenders based on their pro rata lending commitments under the Credit Facility. These initial 5% warrants have
an exercise price of $1.51 per share, are exercisable at any time and expire four years after the date of issuance. In
the event that Air Canada did not grant additional security over certain assets within 90 days of closing, Air Canada
was required to issue to the lenders additional warrants representing up to an additional 5% or 5 million of the total
issued and outstanding shares (determined at the time of issuance of such additional warrants) with an average
exercise price established based on a volume weighted average price over the 5 days before issuance, exercisable at
any time and expiring four years after the date of issuance. These additional warrants were issued on October 19,
2009 and have an exercise price of $1.44 per share. The ascribed value of both the initial and additional warrants,
totalling 10 million warrants, have been included in Contributed surplus on the Consolidated Statement of Financial
Position as at December 31, 2009 in the amount of $7.
(e) The Corporation has aircraft lease transactions with several special purpose entities that qualify as VIEs. The debt has
a weighted average effective interest rate of approximately 8% (2008 - 8%). These aircraft have a carrying value of
$798 (2008 - $836) and are charged as collateral against the debt by the owners thereof. The creditors under these
leasing arrangements have recourse to the Corporation, as lessee, in the event of default or early termination of the
lease. Aircraft related debt amounting to US$633 ($662) (US$676 ($828) as at December 31, 2008) is summarized
as follows (in Canadian dollars):
Final Maturity 2009 2008
Canadian Regional Jet 2010 - 2011 $ 211 $ 257
Boeing 767-300 2011 - 2016 141 185
Airbus 319 2011 - 2014 192 242
Airbus 321 2017 118 144
Total $ 662 $ 828