Air Canada 2014 Annual Report Download - page 106

106106 2014 Annual Report
lien notes due 2020 (the “New Senior Second Lien
Notes” and together with the New Senior First Lien
Notes, the “New Senior Notes”). At the same time, the
Corporation also completed the closing of its US$400
new senior secured (first lien) credit facility, comprised
of a US$300 term loan maturing in 2019 and a US$100
revolving credit facility (collectively, the “New Credit
Facility”). The revolving credit facility was increased
to US$210 in 2014. The term loan is included in Other
secured financing in the table above. As at December
31, 2014, the Corporation had not drawn on the
revolving credit facility.
The Corporation received, in total, net proceeds of
approximately $1,300 from the sale of the New Senior
Notes and from term loan borrowings under the New
Credit Facility (in each case, after deduction of the
applicable transaction costs, fees and expenses). The
Corporation applied a portion of such net proceeds and
borrowings to purchase all of its outstanding 9.250%
Senior Secured Notes due 2015, 10.125% Senior
Secured Notes due 2015 and 12.000% Senior Second
Lien Notes due 2016 (collectively, the “Existing Notes”).
In conjunction with the purchase of the Existing Notes,
the premium costs paid, in the amount of $61, as
well as the write-off of existing transaction costs and
discounts related to the Existing Notes, in the amount
of $34, were recorded as an interest charge in 2013.
The New Senior Notes and the Corporation’s
obligations under the New Credit Facility are senior
secured obligations of Air Canada, guaranteed on a
senior secured basis by one or more of Air Canada’s
subsidiaries, and secured (on a first lien basis with
respect to the New Senior First Lien Notes and
Air Canada’s obligations in the New Credit Facility, and
on a second lien basis with respect to the New Senior
Second Lien Notes), subject to certain permitted liens
and exclusions, by certain accounts receivable, certain
real estate interests, certain spare engines, ground
service equipment, certain airport slots and gate
leaseholds, and certain Pacific routes and the airport
slots and gate leaseholds utilized in connection with
those Pacific routes. The applicable margin with respect
to loans under the revolving credit facility in the New
Credit Facility is 4.50% with respect to LIBOR loans
and banker’s acceptances and 3.50% with respect to
the Index Rate loans or Canadian Prime Rate loans.
The applicable margin with respect to the term loans
under the New Credit Facility is 4.50% with respect to
LIBOR loans and 3.50% with respect to the Index Rate
loans. All such applicable margins are subject to the
adjustments and other terms provided for in the New
Credit Facility.
(c) In April 2014, the Corporation completed a private
offering of US$400 of 7.75% senior unsecured notes
due 2021, with interest payable semi-annually. The
Corporation received net proceeds of approximately
$432 from the sale of these notes.
(d) Other U.S dollar secured financings are fixed and
floating rate financings that are secured by certain
assets including assets described in b) above relating
to the New Credit Facility. It also includes a revolving
credit facility for the financing of jet fuel. Financial
covenants under the revolving credit facility require the
Corporation to maintain certain minimum operating
results and cash balances.
(e) Other CDN dollar secured financing is a revolving
credit facility for the financing of jet fuel. Financial
covenants under the agreement require the
Corporation to maintain certain minimum operating
results and cash balances.
(f) Finance leases, related to facilities and aircraft,
total $283 ($73 and US$181) (2013 – $328 ($76 and
US$237)). During 2014, the Corporation recorded
interest expense on finance lease obligations of
$32 (2013 – $46). The carrying value of aircraft and
facilities under finance leases amounted to $145 and
$42 respectively (2013 – $150 and $45).
Air Canada has aircraft leasing transactions with a
number of structured entities. Air Canada controls
and consolidates leasing entities covering 22 aircraft
as at December 31, 2014. This debt amount includes
any guarantee by Air Canada in the residual value
of the aircraft upon expiry of the lease. The related
aircraft are charged as collateral against the debt by
the owners thereof. The creditors under these leasing
arrangements have recourse to Air Canada, as lessee, in
the event of default or early termination of the lease.
Certain aircraft and other secured finance agreements
contain collateral fair value tests. Under the tests,
Air Canada may be required to provide additional
collateral or prepay part of the financings. The
maximum amount payable in 2015, assuming the
collateral is worth nil, is $212 (US$183). The maximum
amount payable declines over time in relation to the
outstanding principal. Total collateral as at December
31, 2014 is $12 (US$11) (2013 – $5 (US$5)) in the form
of cash deposits, included in Deposits and other assets,
has been provided under the fair value test for certain
of these aircraft leases.
Cash interest paid on Long-term debt and finance
leases in 2014 by the Corporation was $287
(2013 – $345).
Refer to Note 16 for the Corporation’s principal and
interest repayment requirements as at December 31,
2014.