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Air Canada moves forward with C$1.25bn debt refinancing

Last updated: 10:25 26 Sep 2016 EDT, First published: 05:25 26 Sep 2016 EDT

Air Canada Boeing 767 jet taking off from Schiphol airport in Amsterdam, the Netherlands
The move would help the airline to reduce outstanding debt by about C$355mln

Air Canada (TSX:AC.B) has taken a step forward with a C$1.25bn refinancing to cut its debt and save cash.

The flag carrier has priced a private offering of senior secured notes and received commitments from lenders for a new credit facility linked to the refinancing.

As part of the deal, the airline entered into a purchase agreement with a syndicate of initial purchasers relating to a private offering of C$200mln aggregate principal amount of 4.75% senior secured first lien notes due in 2023, which will be sold at par.

The group also received loan commitments for a US$800mln term loan, maturing in 2023, together with a new, undrawn US$300mln revolving credit facility expiring in 2021.

Air Canada intends to use the cash from selling the 2016 senior notes, together with borrowings under the term loan under the 2016 credit facility, and about C$444mln of cash on hand, to pay the redemption price for all its outstanding senior secured notes and to repay its outstanding US$300mln term loan.

The move would help the airline to reduce outstanding debt by about C$355mln and to save about C$60mln in annual interest costs.

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