Air Canada has signed two long-term refinancing deals worth C $ 1.52 billion (~ US $ 1.14 billion) to replace short-term facilities. The first transaction, C $ 787.7 million (~ US $ 588.7 million), will finance 18 Airbus A220 aircraft. Refinancing reduces Air Canada’s short-term cash costs, which is a success for the carrier.
Air Canada’s A220 refinancing
The bulk of the C $ 1.52 billion deal includes a secure facility worth C $ 787.7 million to finance Air Canada’s 18 acquisitions. Airbus A220-300 Of aircraft. Refinancing is for a period of 12 years from the time each aircraft is delivered on a floating interest basis. This equates to an interest rate of approximately 2.39% using current rates.
At the same time, Air Canada will repay C $ 787.7 bridge financing for the same 18 A220 aircraft that went into effect in April 2020. Amounts not paid under bridge financing will be repaid after financing of 18th A220. In the first quarter of 2021.
In particular, Air Canada is paying for its old aircraft financing plan to 18 A220 and instead, goes for a better long-term financing option, which will reduce the airline’s short-term cash costs on new aircraft.
New Improved Equipment Trust Certificates (EETC)
Air Canada has completed the second transaction of two tranches of Improved Equipment Trust Certificates (EETC). Proceeds from these EETCs were used by Air Canada to purchase equipment notes previously purchased through three Boeing 787-9s, three Boeing 777-300ERs, one Boeing 777-200LR and nine Airbus A321-200 aircraft.
The total face value of the two tranches is US $ 552.6 million, with an average interest rate of 5.73%. Class A certificates total US $ 452.6 billion with an annual interest rate of 5.25%, with a deadline of April 1, 2029. Class B certificates carry a total of US $ 100 million and an interest rate of 9% per annum with a due date of October 1, 2025.
Proceeds from the financing were used to repay a US $ 600 million 364-day term loan, along with some cash at the airline.
Overall, debt maturity in 2021 will be approximately C $ 1.42 billion, down to C $ 1.71 billion, once the bridge loans are fully repaid.
Pierre Howell, AIR Canada Managing Director and Treasurer, said in a press release that Simple Flying watched:
“These two refinancing transactions have been completed in a very challenging environment and continue to demonstrate Air Canada’s ability to access financial markets on attractive terms and conditions to refinance existing debt to improve liquidity or to push maturities in the long run and reduce overall financial loss.”
Why would Air Canada want to take the A220s?
Many airlines around the world are postponing new aircraft deliveries amid the ongoing crisis, in which cash conservation is crucial. However, there is one aircraft that has served the airlines well: the Airbus A220. Using the A220, Air Canada practically maintained some links that were not possible with other aircraft, thus providing passenger and cargo aircraft, while at the same time avoiding losses due to the aircraft’s fuel efficiency and versatility.
However, Air Canada is in the past Threatened to cancel A220 orders. Despite the international travel restrictions, the airline did not take action on it.
Overall, airlines are looking at ways to defer their long-term safety and short-term costs. Debt repayment delays Air Canada short-term maturities The airline is continuing delivery This is what we call the “game changing” aircraft: the Airbus A220.
What do you do from Air Canada’s refinancing? Are you happy to see Air Canada taking Airbus A220s? Let us know in the comments!