MONTREAL – Air Canada confirmed Wednesday that it plans to tap into a novel way — at least in Canada — of financing the purchase of five new Boeing 777 aircraft.
The Montreal-based airline announced the private offering of three tranches of enhanced equipment trust certificates (EETC) worth US$714.5 million.
The aircraft are scheduled for delivery between June 2013 and February 2014.
Loxley Aviation Ltd. has been created to facilitate Air Canada’s inaugural offering, Moody’s Investors Service said in assigning ratings of Baa3 to tranche A, B1 to tranche B and B3 to tranche C.
The aircraft, configured with 458 seats in economy, premium economy and premium classes, will be used as collateral.
Air Canada (TSX:AC.B) uses the largest planes in its fleet on long-haul routes.
The airline’s shares were battered Monday after it issued disappointing preliminary first-quarter results and said it was considering a range of undisclosed debt financing options.
The airline’s stock has since mostly recovered, closing Wednesday on the Toronto Stock Exchange at $2.94, up five cents on the day.
Chris Murray of PI Financial Corp. had predicted the carrier would become the first Canadian airline to tap into a new way to finance aircraft purchases that reduces interest rates.
Ottawa’s approval in December of an aircraft protocol opens the doors effective April 1 to the EETC trust market that has been used by U.S. carriers for nearly 20 years.
Murray added in a report last week that Air Canada may also consider the same financing arrangement for its new Boeing 787 planes set to begin delivery next year.
Air Canada, which reports actual results May 3, said it expects its quarterly net loss will be about $260 million, compared with a net loss of $274 million a year earlier.
Adjusted for one-time items, Air Canada expects a loss of $143 million compared with an adjusted loss of $162 million in the first quarter of 2012.
Analysts had been expecting the airline to post an adjusted loss of $120.4 million, or 40 cents per share, on $3 billion of revenues, according to those polled by Thomson Reuters.
Note to readers: This is a corrected story. A previous versiony said Air Canada would offer two tranches totalling US$606.3 million