Air Canada tenders, solicits consents for 9¼%, 10 1/8%, 12% notes

By Marisa Wong

Madison, Wis., Sept. 5 - Air Canada launched separate cash tender offers for any and all of its $600 million outstanding 9¼% senior secured notes due 2015, any and all of its C$300 million outstanding 10 1/8% senior secured notes due 2015 and any and all of its $200 million 12% senior second-lien notes due 2016, according to a news release.

In connection with the tender offers, Air Canada is soliciting consents to amend the respective indentures governing the notes to eliminate most of the restrictive covenants and some events of default and to release all of the collateral securing the notes.

Holders who tender their notes and deliver their consents by the early tender deadline, 5 p.m. ET on Sept. 18, will be eligible to receive the total consideration, which includes a $30 or C$30 early tender payment for each $1,000 or C$1,000 principal amount of notes.

The total consideration is $1,044.63 for the 9¼% notes, C$1,048.57 for the 10 1/8% notes and $1,097.50 for the 12% notes.

Holders tendering after the early deadline will not be eligible to receive the total consideration. The tender offer consideration is $1,014.63 for the 9¼% notes, C$1,018.57 for the 10 1/8% notes and $1,067.50 for the 12% notes.

Holders will also receive accrued interest to the applicable payment date.

The company said it may choose to settle early tendered notes on an early settlement date. The final settlement date will occur promptly after the expiration of the offer.

The tender offers and consent solicitations will expire at 11:59 p.m. ET on Oct. 2.

The deadline for withdrawing tenders and revoking consents is 5 p.m. ET on Sept. 18.

Holders may not tender their notes without delivering their consents or vice versa, but the offers are not conditioned upon receipt of the needed consents to amend the notes.

To amend the 9¼% and 10 1/8% notes, the company needs consents from holders of a majority in principal amount of the outstanding senior secured notes (voting together as a single class). To amend the 12% notes, the company needs consents from a majority in principal amount of the second-lien notes.

Consents for at least 75% in principal amount of the outstanding 9¼% and 10 1/8% notes (voting together as a single class) are required to approve the proposed collateral release under the indenture governing the senior secured notes, and consents for at least 75% in principal amount of the outstanding 12% notes are required to approve the proposed collateral release under the indenture governing the second-lien notes.

More offer details

According to the release, the total consideration for the senior secured notes was determined by taking into account Air Canada's right to redeem 10% of the original principal balance of each series of notes at 103% of par (10% redemption) and its right to redeem the balance of those notes at an early redemption price of 104.625% of par for the 9¼% notes and 105.063% of par for the 10 1/8% notes (early redemption).

Air Canada said it currently intends to redeem any senior secured notes that remain outstanding following the tender offers as part of the 10% redemption, with any remaining outstanding balance to be redeemed under the early redemption terms.

Similarly, the company plans to redeem any second-lien notes that remain outstanding following the offers. Under the terms of the 12% notes, the company may redeem the notes at 109% of par.

The tender offers and consent solicitations are part of a proposed refinancing of Air Canada's outstanding debt and are subject to a financing condition and other conditions.

Citigroup Global Markets Inc. (800 558-3745 or 212 723-6106) is the dealer manager and solicitation agent for the tender offers and consent solicitations.

Global Bondholder Services Corp. (866 470-3800 or 212 430-3774) is the information agent for the U.S. dollar-denominated notes. CST Phoenix Advisors (800 332-6309 or 201 806-2222) is the information agent for the Canadian dollar-denominated notes.

The airline is based in Montreal.

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