Transat AT secures C$700mn in Canadian gov’t funding

Air Transat (TS, Montréal Trudeau) parent Transat AT will borrow up to CAD700 million Canadian dollars (USD570 million) from the Canadian government via the pandemic-relieving Large Employer Emergency Financing Facility (LEEFF) programme, the tour operator revealed in a statement on April 29. It will use CAD310 million (USD252 million) of the funds to reimburse customers whose travel plans have been cancelled because of Covid-19, while the remaining CAD390 million (USD318 million) will support the company’s liquidity needs “until its business has recovered to a level where it can generate cash once again,” it said. In the context of the arrangement, the company will also issue 13 million warrants to the government to buy an equal number of its shares at CAD4.50 (USD3.67) per share, which represents a discount of 1% to Transat’s closing price on April 28. The warrants will vest in proportion to the funds that Transat draws, and 50% will be forfeited if the loan is repaid in full in the first year. However, the warrants would, if fully exercised, represent a dilution for shareholders of about 25%. Conditions to receiving the funding include maintaining active employment at the level of April 28; restrictions on dividends, stock repurchases, and executive compensation; and the reimbursement of travellers who were scheduled to depart on or after February 1, 2020, with these refunds to “begin immediately.” Existing facilities will remain in place and will be extended for two years so that, in total, available financing now represents a maximum of CAD820 million (USD668 million). Air Transat has suspended its flight operations until June due to ongoing travel restrictions. It said previously that it needed at least CAD500 million (USD407 million) in financing to make it through this year. It has repayment obligations for a CAD50 million (USD41 million) revolving facility due on April 29 and a CAD250 million (USD204 million) short-term loan maturing on June 30.