Air Canada 2012 Annual Report Download - page 108

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2012 Air Canada Annual Report
108
8. LONG-TERM DEBT AND FINANCE LEASES
Final Maturity Weighted Average
Interest Rate (%) 2012 2011
Aircraft financing (a)
Fixed rate US dollar financing 2013 – 2021 7.50 $1,278 $ 1,515
Floating rate US dollar financing 2015 – 2021 2.52 650 701
Floating rate Japanese yen financing 2020 0.32 152 199
Floating rate CDN dollar financing 2012 – – 2
Senior secured notes – US dollar (b) 2015 – 2016 9.94 796 813
Senior secured notes – CDN dollar (b) 2015 10.13 300 300
Other secured financing – US dollar (c) 2013 – 2015 6.38 245 235
Other secured financing – CDN dollar (d) 2013 – 2032 5.10 223 204
Long-term debt 3,644 3,969
Finance lease obligations (e) 2013-2033 10.05 363 426
Total debt and finance leases 4,007 4,395
Unamortized discount (9) (12)
Unamortized debt issuance costs (43) (53)
Current portion (506) (424)
Long-term debt and finance leases $ 3,449 $ 3,906
(a) Aircraft financing (US$1,939, and JPY13,275) is secured primarily by specific aircraft with a carrying value of $3,193
(2011 – $3,550). 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$305 and JPY13,275 of the financing is supported by a loan
guarantee by the Export-Import Bank of the United States (“EXIM”). In 2012, the Corporation received net financing
proceeds of $41 (US$42), after financing fees of $1, to refinance amounts related to four Airbus A319 aircraft, with
refinanced terms of five years.
(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”). In
2010, 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, 2012 is $15 (the value at December 31, 2011 was 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 $300 (2011 – $318).