Air Canada unveils $2.75bn bond offering

Air Canada (AC, Montréal Trudeau) announced on July 26 a proposed private offering of two series of high-yield bonds in US and Canadian dollars in an effort to raise about USD2.75 billion. The US dollar senior secured notes mature in 2026, the Canadian dollar denominated notes in 2029.

The bonds represent the biggest portion of a USD5.35 billion refinancing of its debt revealed last week. The deal is expected to price on July 28, sources familiar with the matter told Bloomberg News, and the offering should close in the second or third week of August.

The debt refinancing also includes a new secured US dollar term loan expected to mature in 2028 and a new secured US dollar revolving credit facility expected to mature in 2025.

It would be Air Canada’s first major bond sale since a government bailout in April consisting of loans and equity worth almost CAD5.9 billion (USD4.7 billion). However, in May it issued a USD84 million sinkable bond, which Fitch Ratings gave its lowest investment grade. The sources told Bloomberg that the new bonds were expected to be rated two levels below investment grade by Moody’s and three levels below by S&P Global Ratings.

Air Canada plans to use the proceeds from the term loan to refinance both a loan signed in October 2016 and its 4.75% senior secured notes due in 2023 and 9% second lien notes due in 2024. The new credit facility, meanwhile, will fund its working capital and other general corporate purposes.