Air Canada markets junk-bond portion of $5.4b refinancing

Air Canada has started the marketing of high-yield bonds in US and Canadian dollars, the largest portion of its $5.35b refinancing announced last week. Canada’s biggest carrier plans to raise approximately $2.75b by issuing senior secured bonds maturing in five and eight years, the Montreal-based company said in a statement Monday. An investor call is scheduled for later Monday and the deal is expected to price July 28, according to people familiar with the sale. The transaction would be Air Canada’s first major bond sale after getting a federal bailout package in April consisting of loans and equity worth nearly C$5.9b ($4.7b), making the government a shareholder for the first time since the 1980s. In May, the company issued an $84m sinkable bond, which was rated by Fitch Ratings at the lowest investment grade. The new bonds are expected to be rated two and three levels below investment grade by Moody’s Investors Service and S&P Global Ratings respectively, said the people. The bond portion of the refinancing is coming one week after banks started offering a $2b secured term loan for Air Canada at around 400 basis points over the London interbank offered rate. The refinancing also includes a $600m revolving credit facility Air Canada’s proposed financing is secured by the airline’s international slots, gates and routes, or SGR, with a combined appraised value of about $12b, according to S&P Global Ratings.<br/>