Air Canada cancels tender offers, consent bids for three note series

By Angela McDaniels

Tacoma, Wash., June 27 - Air Canada terminated the tender offers and consent solicitations for its $600 million of 9¼% senior secured notes due 2015, C$300 million of 10 1/8% senior secured notes due 2015 and $200 million of 12% senior second-lien notes due 2016.

"The offers were subject to a financing condition. The recent volatility in the debt and capital markets which has interfered with the immediate financing plans of many companies, including Air Canada, was such that available terms were no longer attractive to us," Michael Rousseau, executive vice president and chief financial officer, said in a company news release.

"However, the strength of our balance sheet and our business overall, and the fact that the notes do not mature until August 2015 and February 2016, provides us flexibility to take advantage of a more opportune time to refinance the notes."

The tender offers were slated to end at 11:59 p.m. ET on July 12.

For each $1,000 or C$1,000 principal amount, the total purchase price was going to be $1,050.70 for the 9¼% notes, C$1,055.25 for the 10 1/8% notes and $1,097.20 for the 12% notes.

The total payments included an early tender premium of $30.00 or C$30.00 for each note tendered by the early tender deadline, 5 p.m. ET on June 27.

The company also planned to pay accrued interest up to but excluding the payment date.

When the offer began June 14, Air Canada said it planned to redeem any senior secured notes that remained outstanding following the completion of the offers at the Aug. 1 redemption prices. The company also planned to redeem the 12% notes at a redemption price of 109% of par.

Consent solicitation

Air Canada was also soliciting consents to amend the notes to eliminate most of the restrictive covenants and some events of default contained in the indentures governing the notes and to release all of the collateral securing the notes.

The company had to secure consents for at least a majority of each series of notes, voting together as a single class for the senior secured notes, to approve the proposed amendments, and it had to obtain at least 75% of each outstanding series of notes, voting together as a single class for the senior secured notes, to approve the proposed collateral release amendments.

Holders could not tender their notes without delivering their consents, and they could not deliver consents without tendering their notes.

Citigroup Global Markets Inc. (800 558-3745 or 212 723-6106) was the dealer manager and solicitation agent. Global Bondholder Services Corp. (866 794-2200 or 212 430-3774) was the information agent for the U.S. dollar notes. CST Phoenix Advisors (800 332-6309 or collect 201 806-2222) was the information agent for the Canadian dollar notes.

Air Canada is Saint-Laurent, Quebec-based full-service airline.

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