Air Canada 2009 Annual Report Download - page 13

2009 Management’s Discussion and Analysis
13
6. SIGNIFICANT EVENTS IN 2009
In order to strengthen its position to manage through the economic downturn and in an effort to mitigate its liquidity risks,
Air Canada entered into the following signifi cant transactions in 2009:
• A public offering for 160,500,000 units at a price of $1.62 per unit with each unit comprised of one Class B voting
share or Class A variable voting share and one-half of a warrant which provided net proceeds of $249 million;
• A secured term credit facility (the “Credit Facility”) which provided fi nancing proceeds of $600 million, less fees of
$20 million. The terms of the Credit Facility permit, on or before the fi rst anniversary and subject to satisfaction
of certain conditions, Air Canada to request an increase to the facility by up to an additional $100 million by
obtaining new commitments from either the existing or new lenders. The Credit Facility is a fi ve-year facility with
the fi rst principal repayment due in August 2010, and bears interest at 12.75%. 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. The Credit Facility also provided for warrants entitling
the debt holders to acquire up to 10% of the shares of the Corporation, which at the time of the issuance of the
warrants represented 10 million shares in the Corporation. As part of the transactions related to the closing of
the Credit Facility, existing fi nancing arrangements of $166 million were repaid as follows:
- A revolving credit facility was repaid in full in the amount of $49 million. The rights of the lender under the
revolving credit facility were assigned to the lenders under the Credit Facility;
- A spare engine fi nancing was partially repaid in the amount of $38 million. This represented the repayment related
to 22 engines under a spare engine fi nancing agreement, with 10 engines remaining under the agreement with a
loan value of $72 million as at December 31, 2009;
- A secured loan with Aeroplan Canada Inc. (“Aeroplan”) was repaid in full in the amount of $79 million. Aeroplan is
a participating lender under the Credit Facility.
• The extension or renewal of labour agreements for 21 months with all of the Corporation’s Canadian-based unions
completed by July 2009 which provide for no increases to wage rates and no changes to group insurance coverage,
benefi ts, or pension benefi t levels during the contract extension or renewal periods;
• Pension funding agreements with the Corporation’s Canadian-based unions (the “Pension MOUs”) and the adoption
of the Air Canada Pension Funding Regulations, 2009 (the “Air Canada 2009 Pension Regulations”). The Air Canada
2009 Pension Regulations relieve Air Canada from making any special (past service cost) payments for the period
beginning April 1, 2009 and ending December 31, 2010. Thereafter, in respect of the period from January 1, 2011
to December 31, 2013, the aggregate annual past service contributions shall equal the lesser of (i) $150 million,
$175 million, and $225 million in respect of 2011, 2012, and 2013, respectively and (ii) the maximum past service
contributions permitted under the Income Tax Act. Pursuant to the Pension MOUs, on October 26, 2009, the
Corporation issued, to a trust, 17,647,059 Class B voting shares. This number of shares represented 15% of the shares
of Air Canada issued and outstanding as at the date of the Pension MOUs and the date of issuance (in both cases
after taking into account such issuance). All net proceeds of sale of such shares by the trust are to be contributed to
the pension plans;
• An agreement with a supplier, in consideration of various contractual commitments, which provided non-refundable
proceeds of $230 million. For accounting purposes, the recognition of these proceeds was deferred in order to be
applied to reduce the cost of these contractual commitments as they are incurred;
• Amendments to credit card processing agreements with one of its principal credit card processors which revise the
levels of unrestricted cash (as defi ned per the agreement and generally based on the aggregate sums of cash, cash
equivalents and short-term investments) required to be maintained;
• An extension of the repayment date of a short-term loan of $78 million (US$75 million) entered into in 2008 which
was originally due in 2009, to 2013;