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COPYRIGHT 2005 American Lawyer Media L.P.
Air Canada is back on its feet after undergoing the largest restructuring in the country's history. Now a unit of ACE Aviations Holding Inc., the carrier hopes it can thrive with fewer employees, smaller aircraft, a greater emphasis on international routes, and a new theme song by Quebec native Celine Dion.
One of many battered victims in its industry, Air Canada filed for protection under the Companies' Creditors Arrangements Act (CCAA) on April 1, 2003. The company emerged from bankruptcy on September 30, 2004, after an Ontario superior court approved its restructuring plan. According to the company, it reduced its debt and lease obligations from approximately $9.7 billion to about $4 billion.
Air Canada's rescue had many components. Trinity Time Investments Limited initially planned to put $524 million into the airline, but withdrew its offer after failing to secure concessions from Air Canada's unions. As a result, Deutsche Bank Securities Inc. increased the size of a rights offering in which it acted as standby purchaser. The issue raised $685 million. Cerberus Capital Management L.P. kicked in $201 million for a 9.2 percent stake in the airline in the form of convertible preferred shares. Cerberus, a New York-based hedge fund, was also rewarded with three seats on ACE's board of directors.
In addition, GE Corporate Financial Services contributed $700 million in debtor-in-possession (DIP) financing and $680 in exit financing, and GE Capital Aviation Services, Inc., renegotiated its aircraft lease and purchase agreements with Air Canada. The carrier also renegotiated thousands of supply contracts, and secured significant concessions from its unions....
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