Air Canada 2010 Annual Report Download - page 108

2010 Air Canada Annual Report
108
of applicable fees.
(h) Conditional sales agreements amount to US$124 principal outstanding at December 31, 2010 (US$133 as at
December 31, 2009) on acquisitions of two A340-500 aircraft financed through conditional sales agreements.
Principal and interest are paid quarterly until maturity in 2019. The purchase price instalments bear interest
at a three month LIBOR rate plus 2.9% (3.20% - 3.29% as at December 31, 2010 and 3.15% - 3.31% as at
December 31, 2009). The financing can be repaid at any time, in whole, with the payment of applicable fees. The
carrying value of the two A340-500 aircraft provided as security under the conditional sales agreements is $185 as
at December 31, 2010.
(i) The Corporation is the primary beneficiary of certain Fuel Facility Corporations in Canada. The debts bear interest
at rates ranging from 2.93% to 5.09%. Of the total debts of $134, $101 relates to a bond payable at a fixed rate of
interest of 5.09% which matures in 2032 with equal semi-annual payments of principal and interest. The remaining
debts have varying maturities. The debts are secured by a general security agreement covering all assets of the Fuel
Facility Corporations. The carrying value of the assets of the fuel facilities is $155 as at December 31, 2010.
(j) Spare parts financing amounts to US$101 as at December 31, 2010 (US$132 as at December 31, 2009). Principal
and interest are repaid quarterly until maturity in 2014, at a floating interest rate equal to the three month LIBOR
rate plus the lender’s incremental cost of funds rate and a margin of 3.00% (5.74% at December 31, 2010 and
5.73% at December 31, 2009). The financing can be repaid subsequent to the 36th monthly anniversary of the
initial funding date, in whole or in part, with the payment of applicable fees. The loan is secured by spare parts and
other assets with a carrying value of $214. The related financing agreements contain certain collateral value tests,
performed on a monthly basis. These tests relate to all inventory collateral and the Corporation may be required to
provide additional inventory collateral, cash collateral, letters of credit, prepay some of the loan or any combination
of the above based on appraised values, as of the date of the test. Any amounts prepaid would be recorded as a
reduction of the loan. There has not been a prepayment or additional collateral required as part of the collateral
value test. This amount declines over time to nil upon the loan expiry.
(k) Spare engine financing amounts to US$63 as at December 31, 2010 (US$70 as at December 31, 2009). Principal and
interest are paid quarterly until maturity in 2013, with a final payment at maturity of 50% of the original principal,
at a floating interest rate equal to the three month LIBOR rate plus 3.40% (3.70% at December 31, 2010 and 3.65%
at December 31, 2009). The financing can be repaid at any time, in whole, with the payment of applicable fees. The
loan is secured by 10 spare engines with a carrying value of $110.
The loan agreement contains a current market value test, beginning on the first anniversary of the facility, and
annually thereafter until expiry. This test relates to 10 engines and under the test, the Corporation may be required
to provide additional collateral or prepay certain facility amounts, based on engine current market values, as of the
date of the test. Any amounts prepaid would be recorded as a reduction of the loan. The maximum amount payable
in December 2011 on the next anniversary, assuming the engines are worth nil and no additional collateral has been
provided, is $54 (US$54). There has not been a prepayment or additional collateral required as part of the current
market value test. This amount declines over time to fifty percent of the original principal upon the loan expiry.
(l) Canadian Regional Jet financing amounts to $10 as at December 31, 2010 ($17 as at December 31, 2009). Principal
and interest are paid quarterly to maturity in 2012. The financing bears interest at a floating rate of the 3 month
Canadian bankers’ acceptance rate plus 1.70% (2.98% at December 31, 2010 and 2.13% at December 31, 2009).
The financing can be repaid at any time, in whole or in part, with the payment of applicable fees. The loan is secured
by four aircraft with a carrying value of $21.
(m) GE flight simulator financing amounts to US$13 as at December 31, 2010 (US$16 as at December 31, 2009).
Principal and interest are repaid quarterly until maturity in 2015 at a floating interest rate equal to the six month
LIBOR rate plus 2.75% (3.50% as at December 31, 2010 and 3.19% at December 31, 2009). The financing is pre-
payable on any interest payment date after September 21, 2009, without the payment of applicable fees. The debt
is secured primarily by certain flight training equipment with a current carrying value of $26.