UPDATE - Air Canada to raise rights offering to C$850 mln
Monday April 26, 8:32 pm ET
(Adds details, background)
VANCOUVER, British Columbia, April 26 (Reuters) - Air Canada (Toronto:AC.TO - News) struck a deal with Deutsche Bank AG (XETRA
BKGN.DE - News) to increase its rights offering to creditors on Monday, a move the insolvent airline said will aid its efforts to lure a new equity partner.The offering has been increased to C$850 million ($630 million) from C$450 million. The latest figure is C$150 million more than the airline had sought last year when it began the process, Air Canada said in a release.
The deal, which needs court approval and is contingent on additional cost concessions from Air Canada`s unions, would reduce the amount it must raise from an outside partner to C$250 million from C$650 million by providing more equity to bond holders.
"Air Canada`s restructuring regains its momentum today with a vote of confidence in our restructuring business plan from a major global financial institution," Chief Executive Robert Milton said.
Canada`s dominant airline obtained court protection from creditors on April 1, 2003, but said on Monday under this plan it could emerge as a reorganized airline by the end of September.
Under the agreement, the offering to creditors will be expanded to C$850 million at the same pre-investment valuation of Air Canada as had been provided in its agreement with Hong Kong magnate Victor Li and his company Trinity Time Investments.
Li earlier this month pulled out of a C$650 million equity deal to rescue Air Canada, forcing the world`s 11th largest airline to seek a new partner and casting doubts about whether it can stay aloft.
Trinity Time Investments, Li`s personal company, walked away from taking a 31 percent stake in the airline because of Air Canada`s unexpectedly large losses and the unions` opposition to cuts in pension plans.
Air Canada said on Monday its new agreement with Deutsche Bank requires that it make C$200 million more in labor cost cuts, but the airline had dropped calls for changes in the pension plan that had drawn union ire. ($1=$1.35 Canadian)