|Ontario court OKs Air Canada restructuring
TORONTO — An Ontario court approved Air Canada's restructuring plan Monday, while one of Canada's major banks sold off its debt in the insolvent carrier and gained rights to buy up to 10 per cent of the voting shares of the restructured airline.
Justice James Farley of Ontario Superior Court approved the airline's plan, that will see it emerge from bankruptcy by the end of September, with a smaller workforce and fleet, more international routes and plans to spin off some of its subsidiaries.
Air Canada had entered bankruptcy protection April 1, 2003 after mounting losses an a battered travel market threatened the Montreal company's future.
In a related move Monday, CIBC said it had struck a deal to sell all its proven claims as an unsecured creditor of Air Canada to a third party for cash. The move will result in a pre-tax gain of about $52 million for the bank, a gain CIBC will book in its fourth quarter.
CIBC also announced it had obtained rights to acquire voting shares of ACE Aviation Holdings Inc., which will become the parent holding company of Air Canada when the reorganization is completed. The rights entitle CIBC to acquire between 3.4 million and 3.8 million voting shares of ACE at $20 a share.
Assuming that ACE will have about 101 million shares outstanding once the restructuring is completed, CIBC would own more than 10 per cent of ACE's outstanding voting shares, but less than four per cent of ACE's total equity, if it exercises its rights.
The bank said it will hold the ACE voting shares solely for investment purposes and not to influence the airline.