Transat AT reaches $700-million aid deal with federal government

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haironfire
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Transat AT reaches $700-million aid deal with federal government

Post by haironfire »

MONTREAL -- Travel company Transat AT Inc. says it has reached a deal with Ottawa to borrow up to $700 million.

The money will come through the federal government's Large Employer Emergency Financing Facility, the same program used to help Air Canada.

Transat says $390 million will be used to help support its business, while $310 million will be used to provide reimbursements to travellers.

Transat has endured a tough year, suspending all flights following the federal government's request in January to stop travel to Mexico and the Caribbean due to the pandemic.

Air Canada and Transat announced earlier this month that the two Montreal-based companies had agreed to call off a deal that would have seen the country's largest airline buy its smaller rival.

Initiated two years ago, the takeover was priced at $720 million before shrinking to $190 million as COVID-19 pounded the transport sector, ultimately dying out on April 2.
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rudder
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Re: Transat AT reaches $700-million aid deal with federal government

Post by rudder »

Transat secures $700 million in funding from the Government of Canada

Refund process of trips cancelled due to the pandemic to begin immediately

MONTRÉAL, April 29, 2021 /CNW Telbec/ - Transat A.T. Inc. ("Transat" or the "Corporation") announced today that it has reached an agreement with the Government of Canada to borrow up to $700 million in additional liquidity through the Large Employer Emergency Financing Facility (LEEFF).

"The agreement reached with the Government of Canada provides us with an additional $700 million in liquidity, which is the amount we needed to move forward with confidence. Our strong balance sheet prior to the pandemic and the aggressive actions we have taken since have enabled us to weather this unprecedented crisis so far. With this support, we now look forward to resuming operations as soon as safe travel is possible and travel restrictions can be lifted. We will then be able to implement our plan to make Transat a solid and profitable company once again, one that will continue to symbolize leisure travel for its many customers in Quebec and elsewhere," declared Jean-Marc Eustache, President and Chief Executive Officer.

"The funds obtained will also enable us to reimburse our customers whose travel had to be cancelled due to the pandemic under conditions that are sustainable for the company, which we welcome."

The new fully repayable credit facilities made available by the Canada Enterprise Emergency Funding Corporation under the Large Employer Emergency Financing Facility, which Transat would use only on an as-needed basis, are as follows:

An amount of $390 million, representing the liquidity needed to support Transat until its business has recovered to a level where it can generate cash once again, broken down as follows:
An amount of $78 million in the form of a non-revolving and secured credit facility bearing interest at CDOR (Canadian Dollar Offered Rate) plus 4.5% and maturing in 2 years; the facility is secured by a first-ranking charge on the assets of Transat A.T. Inc.
A $312 million non-revolving and unsecured credit facility with a 5-year maturity, loaned at a rate of 5% in the first year, increasing to 8% in the second year, and by 2% per annum thereafter, with the possibility of capitalization of interest in the first two years.
In the context of the financing arrangement, Transat issued a total of 13,000,000 warrants for the purchase of an equivalent number of shares of Transat (subject to certain limitations described below), with customary adjustment provisions, at an exercise price of $4.50 per share (representing the volume-weighted average trading price for the five trading days preceding the issuance of the warrants) over a 10-year period, representing 18.75% of the total commitment available under the above non-revolving and unsecured credit facility. The warrants are to vest in proportion to the drawings that will be made, and 50% would be forfeited if the loan were to be repaid in full in the first year.
An amount of $310 million consisting of an unsecured credit facility to provide reimbursement to travelers who were scheduled to depart on or after February 1, 2020, for whom a travel credit was issued as a result of COVID–19. This amount is repayable over a 7-year term and is loaned at the current 7-year Canada Bond rate of 1.2%.
The number of shares issuable upon exercise of the warrants may not exceed 25% of the current number of issued and outstanding shares, nor may it result in the holder owning 20% or more of the outstanding shares upon exercise of the warrants. In the event of an exercise of warrants that surpasses these thresholds, the excess will be payable in cash on the basis of the difference between the market price of Transat's shares and the exercise price. Finally, in the event that the credit facility is repaid in full by its maturity, Transat will have the right to redeem all of the warrants for a consideration equal to their fair market value. The warrants will not be transferable prior to the expiry of the period giving rise to the exercise of such redemption right. In addition, the holder of the warrants will benefit from registration rights to facilitate the sale of the underlying shares and the warrants themselves (once the transfer restriction has been lifted).

In connection with the establishment of these credit facilities, Transat has made certain commitments, including:

The reimbursement of travelers who were scheduled to depart on or after February 1, 2020, to whom a travel credit has been issued due to COVID-19. Refunds will begin immediately, with terms to be communicated separately. As per the agreement, to be eligible, customers will need to expressly indicate their desire for a refund;
Restrictions on dividends, stock repurchases and executive compensation;
Maintaining active employment at the level of April 28, 2021.
In addition to the new funding, the amounts already drawn on the existing facilities will remain in place and will be extended for a period of two years from the implementation of the new financing. The ratios applicable to the existing facilities will be suspended for a period of 18 months. The undrawn credit under the short-term subordinated facility will be cancelled.

In total, the available financing will therefore represent a maximum of $820 million. This includes the newly issued LEEFF funding, as well as existing funding of $120 million divided into $50 million under the secured revolving credit facility with National Bank of Canada and the Bank of Nova Scotia and $70 million under the subordinated credit facility with National Bank of Canada and Export Development Canada.

If all of the available facilities were to be used, it would be at an average rate of approximately 6%, plus the warrants.

https://www.transat.com/en-CA/corporate ... ses/124370
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Ironman2909
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Re: Transat AT reaches $700-million aid deal with federal government

Post by Ironman2909 »

Maintaining active employment at the level of April 28, 2021.
What is the active employement (pilot side) since yesterday? If I'm not mistaken, that is not really good for the TS pilot group..... :|
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Latitude
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Re: Transat AT reaches $700-million aid deal with federal government

Post by Latitude »

Ironman2909 wrote: Thu Apr 29, 2021 7:16 am
Maintaining active employment at the level of April 28, 2021.
What is the active employement (pilot side) since yesterday? If I'm not mistaken, that is not really good for the TS pilot group..... :|
0.

I think it's a shitty clause but again, it's just a loan. Why recall employees to pay salaries and other dues for nothing when all you got is a loan ?

Same goes for AC. ''maintain active employment at the level of April 2021'' .... what is that... It's trash like all other LEAFF loans that AC and Sunwing got. But the government bought 500m$ in AC shares which is already better, and the interest rate is lower (still goes up like crazy after a couple of years)

So we better start lifting restrictions soon....
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hithere
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Re: Transat AT reaches $700-million aid deal with federal government

Post by hithere »

Isn’t there some type of equity purchase in Transat by the government in this deal? Or at least an option to convert debt to equity?
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rudder
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Re: Transat AT reaches $700-million aid deal with federal government

Post by rudder »

hithere wrote: Thu Apr 29, 2021 10:37 am Isn’t there some type of equity purchase in Transat by the government in this deal? Or at least an option to convert debt to equity?
Warrants only.
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hithere
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Re: Transat AT reaches $700-million aid deal with federal government

Post by hithere »

Yes but they can be converted to equity
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200Above
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Re: Transat AT reaches $700-million aid deal with federal government

Post by 200Above »

As a result, Transat’s total net debt may hit $940 million next year, “which is a major burden for a company that has a market capitalization of about $180 million,” Doerksen said.
Idono if this resonates with anyone else, but it sure does with me.
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simply_no_one
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Re: Transat AT reaches $700-million aid deal with federal government

Post by simply_no_one »

Interesting how it was front page news with thousands of comments when AC got their package, which had a lot more stipulations and secured through Aeroplan.

Here AT is getting cash with pretty much zero catch. And not a lot of assets to repo if they fail to pay.
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haironfire
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Re: Transat AT reaches $700-million aid deal with federal government

Post by haironfire »

I must say I believe this is good news. I hope this will help a lot of the employees, although I am sure major restructuring will happen.

Although it does not affect me directly, indirectly I believe it is just another step towards our industry recovering and maintaining as many Canadian Pilot Jobs as possible, and to me that is a good thing. I do not mind investing my own tax payer money in our own industry. Good for you Transat.

Let's just get our industry healthy again. Enough maneuvring by pilots trying to try and climb on each other's heads to try and get up the seniority list.

Next is Westjet. Brighter skies ahead FOR ALL.
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redbusdriver
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Re: Transat AT reaches $700-million aid deal with federal government

Post by redbusdriver »

simply_no_one wrote: Thu Apr 29, 2021 12:39 pm Interesting how it was front page news with thousands of comments when AC got their package, which had a lot more stipulations and secured through Aeroplan.

Here AT is getting cash with pretty much zero catch. And not a lot of assets to repo if they fail to pay.
exactly! transat will be bankrupt in a year or 2, more should've been done to protect taxpayers
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lownslow
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Re: Transat AT reaches $700-million aid deal with federal government

Post by lownslow »

On the assumption that LEEFF operates like a bank (which it should), I think the big takeaway here is that they believe Transat will be reasonably able to pay back the loan or else they wouldn’t have given it.
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alkaseltzer
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Re: Transat AT reaches $700-million aid deal with federal government

Post by alkaseltzer »

The aircraft lessors must be licking their lips...I mean the directors...oh wait, I meant the aircraft lessors...wait, aren’t they one and the same?
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boeingboy
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Re: Transat AT reaches $700-million aid deal with federal government

Post by boeingboy »

I'm glad Transat got money to stay afloat....but

It's a shitty deal, $390 million for the business - except that Transat said they need $500 million to stay afloat, so there is a shortfall already. And the shitty interest rates that everyone but Air Canada is getting - what a crock. I have no problem with paying interest - but make it not only fair - but reasonable.
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altiplano
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Re: Transat AT reaches $700-million aid deal with federal government

Post by altiplano »

boeingboy wrote: Thu Apr 29, 2021 4:12 pm I'm glad Transat got money to stay afloat....but

It's a shitty deal, $390 million for the business - except that Transat said they need $500 million to stay afloat, so there is a shortfall already. And the shitty interest rates that everyone but Air Canada is getting - what a crock. I have no problem with paying interest - but make it not only fair - but reasonable.
I have 2 lines of credit, a secured line at prime plus zero and an unsecured line at prime plus a few percent.

Interest rates commensurate with risk, that's how it works, that's fair and reasonable.

Much of Air Canada's loan deal is secured with assets, it is standard practise that it would be at a better interest rate than an unsecured loan.

Additionally conditions (other than refunds) were placed on the deal with Air Canada that solved government problems. Conditions that will cost money. I don't see those conditions in the AT deal.

I think AT did okay with the deal.
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rudder
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Re: Transat AT reaches $700-million aid deal with federal government

Post by rudder »

altiplano wrote: Fri Apr 30, 2021 4:01 am
boeingboy wrote: Thu Apr 29, 2021 4:12 pm I'm glad Transat got money to stay afloat....but

It's a shitty deal, $390 million for the business - except that Transat said they need $500 million to stay afloat, so there is a shortfall already. And the shitty interest rates that everyone but Air Canada is getting - what a crock. I have no problem with paying interest - but make it not only fair - but reasonable.
I have 2 lines of credit, a secured line at prime plus zero and an unsecured line at prime plus a few percent.

Interest rates commensurate with risk, that's how it works, that's fair and reasonable.

Much of Air Canada's loan deal is secured with assets, it is standard practise that it would be at a better interest rate than an unsecured loan.

Additionally conditions (other than refunds) were placed on the deal with Air Canada that solved government problems. Conditions that will cost money. I don't see those conditions in the AT deal.

I think AT did okay with the deal.
Both the AC and TRZ credit lines provided by the Feds to pay back ticket refunds were unsecured at very low interest rates.

The other Fed loans were issued with interest rates that were risk based.
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altiplano
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Re: Transat AT reaches $700-million aid deal with federal government

Post by altiplano »

Thanks rudder.

What type of rate do you think the open market would place on unsecured credit to airlines today?
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330heavy
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Re: Transat AT reaches $700-million aid deal with federal government

Post by 330heavy »

Latitude wrote: Thu Apr 29, 2021 8:59 am
Ironman2909 wrote: Thu Apr 29, 2021 7:16 am
Maintaining active employment at the level of April 28, 2021.
What is the active employement (pilot side) since yesterday? If I'm not mistaken, that is not really good for the TS pilot group..... :|
0.

I think it's a shitty clause but again, it's just a loan. Why recall employees to pay salaries and other dues for nothing when all you got is a loan ?

Same goes for AC. ''maintain active employment at the level of April 2021'' .... what is that... It's trash like all other LEAFF loans that AC and Sunwing got. But the government bought 500m$ in AC shares which is already better, and the interest rate is lower (still goes up like crazy after a couple of years)

So we better start lifting restrictions soon....
"The relief comes with conditions, including a $1-million ceiling on executive compensation as long as refunds remain unpaid and a floor of 772 active employees - well below the pre-pandemic workforce of 5,200."
boeingboy wrote: Thu Apr 29, 2021 4:12 pm I'm glad Transat got money to stay afloat....but

It's a shitty deal, $390 million for the business - except that Transat said they need $500 million to stay afloat, so there is a shortfall already. And the shitty interest rates that everyone but Air Canada is getting - what a crock. I have no problem with paying interest - but make it not only fair - but reasonable.
I agree, not great interest rates, basically the standard rates since inception of the LEEFF program. The hope was to garner some sort of better rates for a more stricken industry. As indicated above, a secure loan would get lower rates, nonetheless, it would've still been nice for airlines to get a better rate than 8 +. The goal now will be to pay off before the 8% plus hits. It would've also been nice to get some sort government assistance to add employees to the payroll. Here is where the government failed AC and TS.
redbusdriver wrote: Thu Apr 29, 2021 2:43 pm
simply_no_one wrote: Thu Apr 29, 2021 12:39 pm Interesting how it was front page news with thousands of comments when AC got their package, which had a lot more stipulations and secured through Aeroplan.

Here AT is getting cash with pretty much zero catch. And not a lot of assets to repo if they fail to pay.
exactly! transat will be bankrupt in a year or 2, more should've been done to protect taxpayers
Classy. Enjoy your glass house.
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rudder
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Re: Transat AT reaches $700-million aid deal with federal government

Post by rudder »

altiplano wrote: Fri Apr 30, 2021 5:03 am Thanks rudder.

What type of rate do you think the open market would place on unsecured credit to airlines today?
I would have to go look around. But I would be surprised to find unsecured commercial credit for less than 8+%.
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Dias
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Re: Transat AT reaches $700-million aid deal with federal government

Post by Dias »

Nobody would give them that loan except maybe CASHMONEY Payday Advance. The taxpayer is never going to see that money again. Unless they're one of the ones getting a refund.
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