ACE Aviation Holdings Inc. announces the creation of Jazz Air Income Fund
NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR DISSEMINATION
IN THE UNITED STATES
MONTREAL, Nov. 28 /CNW Telbec/ - ACE Aviation Holdings Inc. ("ACE") and
Jazz Air Limited Partnership today announced that a preliminary prospectus has
been filed with all securities regulatory authorities throughout Canada for an
initial public offering of units of Jazz Air Income Fund, which will hold a
minority interest in Jazz.
Jazz is Canada's largest regional airline and the second largest airline
in Canada after Air Canada, based on fleet size and number of routes operated.
Jazz forms an integral part of Air Canada's domestic and transborder market
presence and strategy. Pursuant to a capacity purchase agreement between Air
Canada and Jazz, Jazz provides service to and from lower density markets as
well as higher density markets at off-peak times throughout Canada and to and
from certain destinations in the United States.
Jazz will distribute the net proceeds of the offering to ACE. ACE will
use the proceeds for general corporate purposes and will retain control of
Jazz through a majority retained interest. CIBC World Markets and RBC Capital
Markets are acting as joint bookrunners for the initial public offering.
In connection with the offering, a commitment letter has been entered
into by Jazz with the Royal Bank of Canada and the Canadian Imperial Bank of
Commerce as joint lead arrangers and bookrunners in respect of the
establishment of $165 million senior secured syndicated credit facilities,
subject to the satisfaction of certain customary conditions including the
completion of the offering. On closing of the offering, $115 million is
expected to be drawn under such facilities.
The securities offered have not been, and will not be, registered under
the United States Securities Act of 1933, as amended, and may not be offered
or sold in the United States absent registration or any applicable exemption
from the registration requirement of such Act.
This press release does not constitute an offer to sell or the
solicitation of any offer to buy nor will there be any sale of these
securities in any province, state or jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such province, state or jurisdiction.
ABOUT JAZZ AIR INCOME FUND
The Fund is an unincorporated, open-ended trust established under the
laws of the Province of Ontario, created to indirectly acquire an interest in
the outstanding limited partnership units of Jazz. After completion of the
Offering, ACE will continue to hold a controlling interest in Jazz.
ABOUT JAZZ AIR LP
Jazz is Canada's largest regional airline and the second largest airline
in Canada after Air Canada, based on fleet size and number of routes operated.
Jazz forms an integral part of Air Canada's domestic and transborder market
presence and strategy. Pursuant to a capacity purchase agreement between Air
Canada and Jazz, Jazz provides service to and from lower density markets as
well as higher density markets at off-peak times throughout Canada and to and
from certain destinations in the United States. Jazz currently operates
scheduled passenger service with approximately 684 departures per weekday to
55 destinations in Canada and 16 destinations in the United States with a
fleet of 118 aircraft as of October 31, 2005.
Under the capacity purchase agreement, Air Canada assumes the revenue
risks and is responsible for all commercial aspects of the flying performed by
Jazz such as schedule planning, revenue management, marketing and advertising.
Air Canada pays to Jazz certain fees relating to the flight operations
performed, passengers carried and other items covered by the capacity purchase
agreement. As a result, Jazz focuses on continuing to reduce costs while
maximizing operational excellence.
ABOUT ACE AVIATION HOLDINGS
ACE is the parent holding company of Air Canada and ACE's other
subsidiaries including Jazz. Air Canada is Canada's largest domestic and
international full-service airline and the largest provider of scheduled
passenger services in the domestic market, the transborder market and each of
the Canada-Europe, Canada-Pacific, Canada-Caribbean/Central America and Canada-
South America markets. Air Canada is a founding member of the Star Alliance
network, the world's largest airline alliance group.
In addition, ACE owns a controlling interest in Aeroplan LP and
Destina.ca, which is an on-line travel site. ACE also provides technical
services through ACTS LP, cargo services through AC Cargo LP and Air Canada,
groundhandling services through ACGHS LP and Air Canada and tour operator
services and leisure vacation packages through Touram LP.
Jazz Air Income Fund
Moderators: lilfssister, North Shore, sky's the limit, sepia, Sulako, I WAS Birddog
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you should have titled it, " Jazz, the wet lease charter operator". I thought Jazz was a seperate and autonomous entity?
Globe and Mail
Monday, November 28, 2005
By BRENT JANG
ACE to pull trigger on Jazz trust
$1-billion plan for regional carrier on tap; said to include $150-million unit sale
Air Canada's parent company is poised to announce that it will spin off a minority stake in its regional Jazz airline by creating an income trust that could be worth more than $1-billion.
ACE Aviation Holdings Inc. is putting the final touches on its preliminary prospectus for the trust, targeting a $150-million initial public offering, and plans to file the document this week, possibly today, subject to completing some internal reviews, an industry source said.
"This is moving very, very fast," he said.
ACE would jettison a 15-per-cent stake in Jazz, while keeping the remaining 85 per cent, said the source familiar with the IPO proposal. The size of the IPO won't be determined until December, but the percentage of Jazz to be spun off will likely be in the same ballpark as what ACE sold in Aeroplan Income Fund in June, when investors snapped up a 14.4-per-cent interest in the popular loyalty program.
Montreal-based ACE raised $287.5-million from the Aeroplan IPO, which gave the frequent-flier division a total value of $2-billion at its launch. "Look at Aeroplan as the template for Jazz, and make assumptions based on that for how much of Jazz will be spun off," the source said. "The preliminary prospectus is ready, and it's basically being run through a spell check. The facts and figures that have to be disclosed in a prospectus need to be accurate and double-checked, given that time has passed since the document was first prepared."
In September, ACE was poised to file a Jazz prospectus but delayed its plans, citing uncertainty in the trust market after Ottawa halted advance tax rulings on IPOs, raising fears of new taxes on trusts.
Last Wednesday, however, Finance Minister Ralph Goodale unveiled a tax policy that left trusts untouched.
That development has satisfied ACE chief executive officer Robert Milton, who had been awaiting certainty on trust rules from Ottawa, the source said. So, now that the market has stabilized, ACE is eager to tap into investor demand for new offerings.
A final Jazz prospectus, including details about pricing, is slated to be filed in December, he said.
Jazz spokeswoman Debra Williams declined to comment on the timing of the IPO.
Independent trust analyst Harry Levant said a Jazz IPO that's wrapped up before Christmas could be a popular trust for investors, even though the airline industry in general is a risky bet. He said the relationship between Air Canada and Jazz is at arm's length, in theory, but in the end, Jazz's regional business is dependent on the financial strength of Air Canada's "mainline" operation.
"ACE will be trying to make it look sweet," he said. "There will be an appetite for Jazz, but it remains to be seen whether investors will be feasting. It would bode well for the trust market if Jazz rose off the new issue, and trusts heat up."
ACE plans to market Jazz as a source of stable income because it effectively serves as a charter airline booked by Air Canada for regional flights. Jazz incurs costs for pilots and planes, but it receives a steady stream of revenue from Air Canada, even if a flight is half empty.
Jazz began charging Air Canada an hourly flying rate on Sept. 30, 2004, when Air Canada emerged from bankruptcy protection.
"Jazz doesn't have to worry about fluctuations in passenger loads. If Jazz runs on a Monday and it's half empty, it's the same fee as if it's full. It has a guarantee of revenue because of a capacity purchase agreement," the source said. As part of that pact, Jazz pumps jet fuel into its planes but Air Canada pays those fuel bills.
Jazz had capacity last month of 358 million available seat miles (ASMs), or 40 per cent of WestJet Airlines Ltd.'s capacity of 905 million ASMs. But as a trust, Jazz's $1-billion value on the stock market would be two-thirds the size of WestJet's $1.5-billion valuation of common shares.
Halifax-based Jazz has its roots spread across Canada. In 2002, Jazz emerged as the new name for the merger two years earlier of four regional carriers: Air BC, Canadian Regional Airlines, Air Ontario and Air Nova.
Jazz has 3,700 employees and 119 aircraft, which seat 37 to 75 people. The carrier has been growing rapidly, with its passenger traffic in October up 77.8 per cent from the same month last year.
Jazz CEO Joseph Randell, in a corporate presentation, wrote that Air Canada effectively "buys or rents the capacity flown by the regional carrier."
ACE has signed a memorandum of understanding with US Airways Group Inc. to have Jazz operate some flights on behalf of the U.S. airline over the next five years.
Globe and Mail
Monday, November 28, 2005
By BRENT JANG
ACE to pull trigger on Jazz trust
$1-billion plan for regional carrier on tap; said to include $150-million unit sale
Air Canada's parent company is poised to announce that it will spin off a minority stake in its regional Jazz airline by creating an income trust that could be worth more than $1-billion.
ACE Aviation Holdings Inc. is putting the final touches on its preliminary prospectus for the trust, targeting a $150-million initial public offering, and plans to file the document this week, possibly today, subject to completing some internal reviews, an industry source said.
"This is moving very, very fast," he said.
ACE would jettison a 15-per-cent stake in Jazz, while keeping the remaining 85 per cent, said the source familiar with the IPO proposal. The size of the IPO won't be determined until December, but the percentage of Jazz to be spun off will likely be in the same ballpark as what ACE sold in Aeroplan Income Fund in June, when investors snapped up a 14.4-per-cent interest in the popular loyalty program.
Montreal-based ACE raised $287.5-million from the Aeroplan IPO, which gave the frequent-flier division a total value of $2-billion at its launch. "Look at Aeroplan as the template for Jazz, and make assumptions based on that for how much of Jazz will be spun off," the source said. "The preliminary prospectus is ready, and it's basically being run through a spell check. The facts and figures that have to be disclosed in a prospectus need to be accurate and double-checked, given that time has passed since the document was first prepared."
In September, ACE was poised to file a Jazz prospectus but delayed its plans, citing uncertainty in the trust market after Ottawa halted advance tax rulings on IPOs, raising fears of new taxes on trusts.
Last Wednesday, however, Finance Minister Ralph Goodale unveiled a tax policy that left trusts untouched.
That development has satisfied ACE chief executive officer Robert Milton, who had been awaiting certainty on trust rules from Ottawa, the source said. So, now that the market has stabilized, ACE is eager to tap into investor demand for new offerings.
A final Jazz prospectus, including details about pricing, is slated to be filed in December, he said.
Jazz spokeswoman Debra Williams declined to comment on the timing of the IPO.
Independent trust analyst Harry Levant said a Jazz IPO that's wrapped up before Christmas could be a popular trust for investors, even though the airline industry in general is a risky bet. He said the relationship between Air Canada and Jazz is at arm's length, in theory, but in the end, Jazz's regional business is dependent on the financial strength of Air Canada's "mainline" operation.
"ACE will be trying to make it look sweet," he said. "There will be an appetite for Jazz, but it remains to be seen whether investors will be feasting. It would bode well for the trust market if Jazz rose off the new issue, and trusts heat up."
ACE plans to market Jazz as a source of stable income because it effectively serves as a charter airline booked by Air Canada for regional flights. Jazz incurs costs for pilots and planes, but it receives a steady stream of revenue from Air Canada, even if a flight is half empty.
Jazz began charging Air Canada an hourly flying rate on Sept. 30, 2004, when Air Canada emerged from bankruptcy protection.
"Jazz doesn't have to worry about fluctuations in passenger loads. If Jazz runs on a Monday and it's half empty, it's the same fee as if it's full. It has a guarantee of revenue because of a capacity purchase agreement," the source said. As part of that pact, Jazz pumps jet fuel into its planes but Air Canada pays those fuel bills.
Jazz had capacity last month of 358 million available seat miles (ASMs), or 40 per cent of WestJet Airlines Ltd.'s capacity of 905 million ASMs. But as a trust, Jazz's $1-billion value on the stock market would be two-thirds the size of WestJet's $1.5-billion valuation of common shares.
Halifax-based Jazz has its roots spread across Canada. In 2002, Jazz emerged as the new name for the merger two years earlier of four regional carriers: Air BC, Canadian Regional Airlines, Air Ontario and Air Nova.
Jazz has 3,700 employees and 119 aircraft, which seat 37 to 75 people. The carrier has been growing rapidly, with its passenger traffic in October up 77.8 per cent from the same month last year.
Jazz CEO Joseph Randell, in a corporate presentation, wrote that Air Canada effectively "buys or rents the capacity flown by the regional carrier."
ACE has signed a memorandum of understanding with US Airways Group Inc. to have Jazz operate some flights on behalf of the U.S. airline over the next five years.
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Just like those cool Westjet commercials. 
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PRELIMINARY PROSPECTUS
Initial Public Offering November 28, 2005
™
JAZZ AIR INCOME FUND
http://www.sedar.com/csfsprod/data62/fi ... rosENG.pdf
Initial Public Offering November 28, 2005
™
JAZZ AIR INCOME FUND
http://www.sedar.com/csfsprod/data62/fi ... rosENG.pdf
