Air Canada said that it has concluded a secured revolving loan agreement with Aeroplan Canada which will provide the airline with up to CAD $100 million and assist with its liquidity requirements.
Subject to the terms of the agreement, amounts are available for drawdown until June 30, 2010 and are equal to the aggregate of the previous 60 days accumulated purchases of reward seats by Aeroplan from Air Canada, up to a maximum of $100 million. Concurrently with the loan, Air Canada remitted to Aeroplan approximately CAD $40 million to reverse amounts remaining on accelerated payments previously disbursed to Air Canada under the November 2008 prepayment agreement with Aeroplan. The effect of this arrangement would have reversed by the end of the third quarter of 2009.
The loan is secured by Air Canada’s interest in Air Canada Vacations (ACV). As long as any amount is outstanding under this loan, Air Canada’s interest in ACV will also secure Air Canada’s obligations to Aeroplan under the commercial participation services agreement. ACV may continue to pay cash dividends to Air Canada and the airline is entitled to prepay any amount of the loan, at any time, without penalty.
Under the terms of the tentative pension funding agreements reached with its Canadian based unions this month, Air Canada is required to raise at least $600 million as a condition precedent for the pension funding arrangements. If such liquidity becomes available, Air Canada would terminate its loan agreement with Aeroplan and use its interest in ACV as security for this other facility.
Air Canada has made an initial draw-down under the loan of $79 million.
