MONTREAL /CNW Telbec/ - Air Canada announced that it has
reached an agreement with the Office of the Superintendent of Financial
Institutions (OSFI) in respect of pension funding relief. The agreement
establishes a Protocol under which OSFI will recommend to the Federal
government the adoption of a regulation which would allow Air Canada to extend
the payment of pension plan solvency deficiencies over a period of 10 years as
opposed to the current maximum of 5 years.
The Protocol provides that the solvency deficiencies will be paid down in
accordance with an agreed upon schedule of variable annual payments as opposed
to the current regulatory requirement for equal annual payments. Air Canada
has agreed to request court approval to remit approximately $34 million in
special payments to certain pension plans immediately.
In consideration of OSFI proposing a regulation allowing for the
elimination of any deemed trust which may have arisen as a result of required
solvency deficit payments prior to the execution of the Protocol, Air Canada
and OSFI have agreed that upon Air Canada's emergence from CCAA proceedings,
the pension plan trustees will receive subordinated secured promissory notes
in the aggregate amount of $346.6 million with a second charge over the assets
of Air Canada. The notes will be reduced as solvency payments are made in
accordance with the agreed-upon schedule. The terms of the notes will not
materially affect the aircraft and exit financing to be made available to Air
Canada pursuant to the Global Restructuring Agreement with GECAS nor
materially restrict any future secured or unsecured financing.
The implementation of the Protocol is conditional upon (i) CCAA emergence
on or prior to December 31, 2004; (ii) the amended regulations coming into
effect, and (iii) consent being obtained from plan beneficiaries through the
unions and court appointed representatives of non-unionized employees and
The Protocol satisfies the funding relief condition in the Standby
Purchase Agreement with Deutsche Bank.