Transat of Canada obtains a last Covid loan of 150 million Canadian dollars

Transat AT Inc. – the parent company of Air Transat (TS, Montreal Trudeau) – secured a final Covid relief loan of C$150 million (USD 117 million) from the Canada Enterprise Emergency Funding Corporation (CEEFC).

The funding will be Transat’s latest loan through the Large Employer Emergency Financing Facility (LEEFF), aimed at protecting jobs in Canada’s airline sector during the pandemic, CEEFC said in a statement. The loan concludes a request that Transat filed at the height of the Omicron wave, which severely affected the company’s revenues and workers.

CEEFC said applications under the LEEFF Covid program are now closed. “CEEFC has stopped accepting new LEEFF applications, reflecting Canada’s strong economic recovery from the pandemic and the fact that no new applications for LEEFF loans have been received from Canadian businesses, exception of Transat, over the past year,” he said.

The C$150 million for Transat will include C$100 million (US$78 million) in LEEFF loans and another C$50 million (US$39 million) credit facility subject to Transat raising financing third (dollar for dollar up to C$50 million) by July 29. 2023.

In addition, Transat’s lenders have agreed to defer from April 2023 to April 2024 the maturity dates of debts totaling 198 million Canadian dollars (154 million U.S. dollars), as well as to defer from October 2022 to October 2023, the date by which the company must meet certain financial covenants, the company said in a separate statement.

The additional liquidity is in addition to LEEFF’s initial financing of 700 million CAD (545 million USD) on April 29, 2021. On March 10, 2022, Transat also received an additional amount of 43.3 million CAD (33.7 million USD) for traveler refunds and negotiated 20-month deferrals for certain key terms of the LEEFF unsecured financing agreement.

“This additional financing and the changes made to existing agreements strengthen our cash position and strengthen our financial resilience,” commented President and CEO Annick Guérard. “This significant funding milestone, combined with sales that have performed well over the past few months, will give us the financial flexibility to roll out our strategic plan with optimism and confidence.”

Transat said it would draw on CEEFC’s C$100 million credit facility as needed over the coming months. Of this amount, 80% was made available under the terms and conditions of a non-revolving and unsecured credit facility amended in March 2022, and 20% under the terms and conditions of a revolving and secured credit facility.

As part of the LEEFF financing, Transat issued 4,687,500 warrants for the purchase of an equivalent number of Transat shares at an exercise price of 3.20 CAD (2.49 USD) per tenth share year. Warrants will vest in proportion to the draws that will be made, but 50% of the warrants vested will be forfeited if the loan were to be repaid in full by December 31, 2023.

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