Air Canada raises $1.59B to ease losses
Financing will bolster liquidity after hit from confinement measures
MONTREAL—Air Canada has raised $1.59 billion from share and debt offerings intended to offset some of the carrier’s losses from the COVID-19 pandemic.
The company said Tuesday it sold 35.4 million voting shares at $16.25 apiece for gross proceeds of $575.6 million.
It also issued $1.02 billion in convertible senior unsecured notes due in 2025, well above its initial plan for about $540 million.
The financing proceeds help to bolster Air Canada’s liquidity after confinement measures and border shutdowns “destroyed demand and depleted cash,” chief financial officer Michael Rousseau said in a release.
Despite more than $1 billion in losses in the first quarter, a positive reaction from the public markets amounted to “a strong endorsement” of the airline’s strength, he said.
The underwriters exercised their over-allotment option to buy 15 per cent of the shares on offer, and initial buyers of the convertible notes exercised their option to purchase an additional 15 per cent, Air Canada said.
The company is burning through about $20 million per day — $620 million per month — in the second quarter, said National Bank analyst Cameron Doerksen, as the bulk of the fleet remains grounded while fixed costs such as plane leases persist.
“We believe demand for air travel and associated bookings (i.e., cash in the door) will progressively improve in Q3 and into Q4 and we forecast the cash low point at $5.4 billion in Q1/21, so we are very comfortable that Air Canada has sufficient liquidity to manage through the crisis,” Doerksen said.
Liquidity now amounts to roughly $9.7 billion, giving the company “significantly more staying power under a more bearish COVID-19 scenario,” said analyst Walter Spracklin of RBC Dominion Securities.
Spracklin said he does not expect a return to break-even cash flow until 2022.