Air Canada raises C$1 billion in fresh liquidity

Wed Jul 29, 2009 5:39pm EDT
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TORONTO (Reuters) - Air Canada said on Wednesday it has raised C$1.02 billion ($936 million) in a series of transactions with its lenders and other stakeholders in a move that will likely help the carrier avoid its second bankruptcy filing in six years.

The deals include a C$700 million credit facility that Air Canada negotiated with GE Canada Finance Holding Co, Export Development Canada, Aeroplan Canada Inc and ACE Aviation Holdings, the airline said in a statement. ACE is Air Canada's holding company, and Aeroplan manages its loyalty program.

The facility will let the country's biggest airline refinance some of its debt and provide it with working capital, it said.

"By any measure, raising C$1 billion in new liquidity is a tremendous achievement, particularly in view of current credit markets and the state of the airline industry," said Air Canada Chief Executive Calin Rovinescu.

The new money could also go a long way in averting a bankruptcy filing. Air Canada has been faced with a sharp drop in global travel and intense competition at home against the likes of WestJet.

It has said it needs a minimum of C$600 million in new financing to meet its short-term needs.

"For management to pull this off is very good," said one investment banker watching the deal, remarking at a struggling airline industry that has grounded many planes and boosted market supply of aircraft for sale or for rent.

"The share price should react very favorably to this."

Air Canada announced the moves after markets closed. During the day, its class B shares rose 11 Canadian cents to close at C$1.62 on the Toronto Stock Exchange.   Continued...