Air Canada has reached a deal with Deutsche Bank that will raise C$850 million ($637 million) by giving all the airline's creditors a chance to buy new shares.
Under the agreement, subject to several conditions, the bank will buy any shares not acquired by other creditors. Deutsche Bank had earlier agreed to guarantee up to C$450 million worth of shares in a rights offering.
Air Canada will continue to search for a new equity partner, but only for C$250 million, to bring total equity up to C$1.1 billion. The agreement with Deutsche Bank goes a long way to replace the C$650 million equity investment that Hong Kong businessman Victor Li says he is withdrawing because of the airline's financial prospects and a row with unions over their pension plan (Flight International, 13-19 April).
"Air Canada's restructuring regains its momentum today with a vote of confidence in our restructuring business plan from a major global financial institution," says Air Canada president Robert Milton.
One of the conditions attached to the agreement is that Air Canada must complete its restructuring, started 13 months ago, by 30 September. Another is that the unions must find another C$200 million in cost savings to meet a C$1.1 billion target set last year.
Meanwhile, Ottawa is considering raising the foreign ownership limit on airlines from 25% to 49%. Raising the limit would make Air Canada and other Canadian carriers more attractive to foreign investors.
Ottawa is also considering cutting the rent it charges airports by 50% on the condition savings are passed on to the airlines. This would result in an industry-wide saving of about C$125 million.
Source: Flight International
