Air Canada 2010 Annual Report Download - page 107

Consolidated Financial Statements and Notes
107
As described above under (d), total outstanding debt under this facility of $700 was repaid upon the issuance of
the Notes in August 2010. Based on the change in cash flows under the Credit Facility due to its repayment, the
Corporation recorded a charge of $54 in interest expense in 2010, including early payment fees of $29 and $25 for
the adjustment related to the unamortized portion of transaction costs and debt discounts.
Interest under the Credit Facility was charged 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).
Under the Credit Facility, Air Canada issued to the lenders, concurrently with the first drawdown of $600, 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, were included in Contributed surplus on the Consolidated Statement of Financial
Position as at December 31, 2009 in the amount of $7.
(f) 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% (2009 - 8%). These aircraft have a carrying value of
$698 (2009 - $798) 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$535 ($533) (US$633 ($662) as at December 31, 2009) is summarized
as follows (in Canadian dollars):
 Final Maturity 2010 2009
Canadian Regional Jet 2011 $ 138 $ 211
Boeing 767-300 2011 - 2016 123 141
Airbus 319 2011 - 2014 170 192
Airbus 321 2017 102 118
Total  $ 533 $ 662
In August 2010, the Corporation concluded a credit agreement with GE Japan Corporation, PK Airfinance Japan
(“GE Japan”) for a senior secured term loan facility in the amount of up to approximately US$171 (the “Facility”)
to refinance amounts related to sixteen aircraft currently operated by Air Canada and leased from special purpose
leasing entities which are consolidated by Air Canada. The credit agreement bears interest at a rate of one month
US LIBOR plus 5.50%. On a consolidated basis, the draws on the Facility will be accounted for as a settlement of the
special purpose leasing entities’ debt related to these aircraft. Draw-downs under the facility are subject to certain
customary terms and conditions.
The Facility will be available in 2011 to refinance up to US$129 of the amount related to eight Airbus A319
aircraft and four Boeing B767-300ER aircraft, with terms of seven and four years respectively. The Facility will
also be available in 2012 to refinance up to US$42 of the amount related to four Airbus A319 aircraft, with a
term of five years. As a result of this Facility, the amounts due under the existing debt maturities within the next
12 months that will be refinanced by the commitment on a long-term basis have been classified as long-term at
December 31, 2010.
(g) The term loan financing amounts to US$75 principal outstanding at December 21, 2010 (US$75 as at
December 31, 2009). The financing bears interest at one month LIBOR plus 5.98% (6.25% as at December 31, 2010
and 6.21% as at December 31, 2009) and is secured by a security interest and a movable hypothec in the principal
amount of $400. The financing can be repaid at any time prior to maturity, in whole or in part, without the payment