Air Canada Completes Its $1.4 Billion Refinancing Transaction

MONTREAL, Sept. 26, 2013 /PRNewswire/ - Air Canada announced today that it has completed its previously announced private offerings of senior secured notes, consisting of (i) U.S.$400 million principal amount of 6.750% senior secured first lien notes due 2019 and C$300 million principal amount of 7.625% senior secured first lien notes due 2019 (the "New Senior First Lien Notes") and (ii) U.S.$300 million principal amount of 8.750% senior secured second lien notes due 2020 (the "New Senior Second Lien Notes" and together with the New Senior First Lien Notes, the "New Senior Notes"). Air Canada also announced today that it has completed the closing of its previously announced U.S.$400 million new senior secured (first lien) credit facility, comprised of a U.S.$300 million term loan maturing in 2019 and a U.S.$100 million revolving credit facility (collectively, the "New Credit Facility"). The revolving credit facility was not drawn upon in connection with the closing.

"The successful refinancing of our 2010 notes is another important milestone in achieving our stated priorities: It significantly lowers our cost structure, strengthens our balance sheet and improves our credit profile," said Michael Rousseau, Executive Vice President and Chief Financial Officer. "The effective weighted interest rate decreased approximately 300 basis points, the maturity has been extended four years and the total availability under our new financing has increased by C$300 million on substantially the same collateral pool. We are pleased with the offerings' reception, which reflects positively on Air Canada and our continued progress to reduce costs and achieve sustainable profitability."

Air Canada received, in total, net proceeds of approximately C$1,300 million 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). Air Canada applied a portion of such net proceeds and borrowings to purchase today all of Air Canada's 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") that were validly tendered on or before the early tender deadline (which was 5:00 p.m., New York City time, on September 18, 2013), in connection with the previously announced separate cash tender offers commenced by Air Canada on September 5, 2013. Air Canada will use a portion of the remaining net proceeds and borrowings to purchase or redeem any of its Existing Notes not tendered prior to the early tender deadline. In conjunction with the purchase of the Existing Notes, the premium costs paid, in the amount of C$61 million, as well as the write off of existing transaction costs and discounts related to the Existing Notes, in the amount of C$34 million, will be recorded as an interest charge in the third quarter of 2013. Air Canada will use the remaining net proceeds and borrowings for working capital and general corporate purposes.

The New Senior Notes and Air Canada'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 under 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 under 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 adjustment and other terms of the New Credit Facility.

The New Senior Notes were offered and sold on a private placement basis to accredited investors in certain provinces of Canada. The New Senior Notes were offered and sold in the United States only to qualified institutional buyers in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S. persons in transactions outside the United States in reliance on Regulation S under the Securities Act. The New Senior Notes have not been and will not be qualified for sale to the public under applicable Canadian securities laws and, accordingly, any offer and sale of the New Senior Notes in Canada will be made on a basis that is exempt from the prospectus requirement of such securities laws. The New Senior Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and state securities laws.

This press release shall not constitute an offer to sell the New Senior Notes or the solicitation of an offer to buy the New Senior Notes, nor shall there be any sale of the New Senior Notes in any state or jurisdiction where such offer, solicitation or sale is not permitted.

Caution Regarding Forward-Looking Statements

Air Canada's public communications may include forward-looking statements within the meaning of applicable securities laws. Forward-looking statements, by their nature, are based on assumptions and are subject to important risks and uncertainties. Forward-looking statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business. Actual results may differ materially from results indicated in forward-looking statements due to a number of factors, including without limitation, industry, market, credit and economic conditions, the ability to reduce operating costs and secure financing, pension issues, energy prices, employee and labour relations, currency exchange and interest rates, competition, war, terrorist acts, epidemic diseases, environmental factors (including weather systems and other natural phenomena, and factors arising from man-made sources), insurance issues and costs, changes in demand due to the seasonal nature of the business, supply issues, changes in laws, regulatory developments or proceedings, pending and future litigation and actions by third parties as well as the factors identified throughout Air Canada's public disclosure file available at www.sedar.com. Any forward-looking statements contained in this news release represent Air Canada's expectations as of the date of this news release and are subject to change after such date. However, Air Canada disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.

SOURCE Air Canada



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