Tuesday,  May 11, 2021  10:12 pm

Transat extends termination date of $250M loan; EU decision expected in June

Transat extends termination date of $250M loan; EU decision expected in June
Michael Pihach

Michael Pihach is an award-winning journalist with a keen interest in digital storytelling. In addition to PAX, Michael has also written for CBC Life, Ryerson University Magazine, IN Magazine, and DailyXtra.ca. Michael joins PAX after years of working at popular Canadian television shows, such as Steven and Chris, The Goods and The Marilyn Denis Show.

Transat AT has extended the termination date of its $250-million short-term loan facility by three months, the company announced on Thursday (Feb. 18). 

In a release, the company said the extension will give it some "additional room" to manoeuvre to secure financing with the decision from the European Commission (EC) regarding the acquisition by Air Canada, which Transat said is expected to come this June. 

Transat said the facility was arranged on Oct. 10, 2020, with Export Development Canada and National Bank of Canada as lead arranger.

The loan facility will terminate at the earliest date between June 30 and the closing of the arrangement with Air Canada.

READ MORE: EU approval still required in Air Canada’s takeover of Transat

It may still be drawn in tranches at any time before a date now set at May 31, 2021, subject to meeting the relevant prior conditions and applicable borrowing conditions. 

Those conditions have not been amended, and include certain requirements regarding freely available cash before and after drawing on the facility.

The Government of Canada approved the $190 million-dollar transaction between Air Canada and Transat on Feb. 11.

"...the proposed purchase of Transat A.T. by Air Canada will bring greater stability to Canada’s air transport market," said Minister of Transport Omar Alghabra in a statement, adding how the acquisition is subject to strict terms and conditions. 

The EC, which oversees competition policy in the 27-member European Union, is currently studying the deal to determine if it will impact competition, increase prices and lead to fewer choices for consumers.

READ MORE: "Canada closed to competition," says WestJet, after Ottawa approves Air Canada-Transat deal

While the Canadian government gave the transaction the green light, the agreement could possibly be in jeopardy as the sale was set to be completed by Feb. 15.

Now that the deadline has passed, and without the approval of the EC, Air Canada and Transat are currently entitled, at any time, to terminate the arrangement upon notice to the other party. 

Critics speak up

Meanwhile, Quebecor President and CEO Pierre Karl Péladeau continues to  express interest in buying Transat AT through his investment company Gestion MTRHP.

Mr. Péladeau, also known by his initials "PKP," says the proposed transaction would have serious anti-competitive effects.

“By swallowing up Transat, which is a direct competitor for the vast majority of transatlantic routes and sun destinations, Air Canada would concentrate more than 60% of the market, an unacceptable threshold in any industry," he wrote in a column entitled "Save Transat, together," published Saturday (Feb. 13) in several media outlets. 

WestJet, too, has blasted Ottawa for approving the deal. 

Ed Sims, WestJet president and CEO, said last week that Ottawa's approval of the transaction "shows blatant disregard for all Canadians who believe in healthy competition." 

"When Canadians look to explore the world and reunite with family and friends once again, they will face fewer choices and higher fares," Mr. Sims said in a statement. 

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