Air Canada 2011 Annual Report Download - page 100

2011 Air Canada Annual Report
100
9. LONG-TERM DEBT AND FINANCE LEASES
Final Maturity Weighted Average
Interest Rate (%) 2011 2010
Aircraft financing (a)
Fixed rate US dollar financing 2012 – 2021 7.52 $1,515 $ 1,863
Floating rate US dollar financing 2015 – 2021 2.52 701 620
Floating rate Japanese yen financing 2020 0.33 199 207
Floating rate CDN dollar financing 2012 2.98 2 10
Senior secured notes – US dollar (b) 2015 – 2016 9.94 813 796
Senior secured notes – CDN dollar (b) 2015 10.13 300 300
Other secured financing – US dollar (c) 2013 – 2015 5.72 235 250
Other secured financing – CDN dollar (d) 2012 – 2032 4.61 204 134
Long-term debt 3,969 4,180
Finance lease obligations (e) 2013 – 2033 10.01 426 493
Total debt and finance leases 4,395 4,673
Unamortized discount (12) (16)
Unamortized debt issuance costs (53) (62)
Current portion (424) (567)
Long-term debt and finance leases $ 3,906 $ 4,028
(a) Aircraft financing (US$2,178, JPY15,073 and $2) is secured primarily by specific aircraft with a carrying value of $3,550
(2010 – $3,963). For the majority of the financing, principal and interest is repayable quarterly until maturity and can be
repaid at any time with the payment of applicable fees. US$347 and JPY15,073 of the financing is supported by a loan
guarantee by the Export-Import Bank of the United States (“EXIM”). In 2010, the Corporation concluded a credit
agreement to refinance amounts related to sixteen aircraft. In 2011, the Corporation received net financing proceeds of
$125 (US$128) after financing fees of $2, through draws on the facility for twelve aircraft and the facility will be
available in 2012 to refinance up to US$42 of the amount related to four aircraft.
(b) In 2010, the corporation completed a private offering of two series of senior secured notes, consisting of US$600 senior
secured first lien notes due 2015 (the "U.S. Dollar First Lien Notes") and $300 senior secured first lien notes due 2015
(the "Canadian Dollar First Lien Notes" and, collectively with the U.S. Dollar First Lien Notes, the “First Lien Notes”). The
Corporation also completed a private offering of US$200 senior secured second lien notes due 2016 (the "Second Lien
Notes" and, together with the First Lien Notes, the "Notes"). The Corporation received net proceeds of $1,075, after
deduction of fees, expenses and discounts.
Prepayment options within the First Lien Notes and Second Lien Notes are considered embedded derivatives. The value of
these embedded derivatives at December 31, 2011 and 2010 is negligible. Upon specified change of control events or
upon certain sales of assets, the Corporation must offer to repurchase the Notes.
The Notes are senior secured obligations of the Corporation, (i) secured on a first-lien basis (in the case of the First Lien
Notes) or on a junior lien basis (in the case of the Second Lien Notes), subject to certain permitted liens, by accounts
receivable, certain real estate interests, certain spare engines, ground equipment, certain airport slots and gate leaseholds,
and the Corporation’s licenses to operate its Pacific routes and the airport slots and gate leaseholds utilized in connection
with these Pacific routes and (ii) guaranteed on a senior secured basis by a subsidiary of the Corporation, subject to
certain thresholds and exclusions.
(c) Other US dollar secured financings are fixed and floating rate financings that are secured by certain assets including
certain items of property and equipment with a current carrying value of $318 (2010 – $355).