Deutsche Bank bought $850 million and $750 million of Air Canada claims in separate auctions last week. The bids were 14 1/4 and 14 1/2, respectively, with the labor unions and CIBC World Markets the sellers, a dealer said. "This pretty much cleaned the claims up," a dealer noted. "There is not a lot left," another trader added. A CIBC banker referred questions to a spokeswoman who declined comment. A Deutsche Bank trader declined comment.
The auctions came on the back of Air Canada obtaining creditor approval for its plan of reorganization. Next week, Air Canada will seek final approval to its plan from an Ontario-based bankruptcy court, which will be the final milestone for bankruptcy emergence, an Air Canada spokesman said. Approval was considered "a crucial milestone" in the restructuring process, said Robert Milton, president and ceo of Air Canada, in a release. Air Canada plans to emerge from bankruptcy by the end of September.
The reorganization plan offers unsecured creditors the right to purchase C$850 million of additional Air Canada equity at a discount. Deutsche Bank is the underwriter for the offering. The plan also offers a maximum recovery rate of 9.25 Canadian cents and a minimum of 6.17 Canadian cents for each dollar on proven claims.
Unsecured lenders, which were bank, bond and long-term debt holders, suppliers, labor and trade creditors, were slated to end up with almost 88% of the airline after the restructuring is completed. Several weeks ago Goldman Sachs bought a ¥20 billion (C$251 million) auction of Air Canada trade claims sold bySumitomo Bank's Tokyo Leasing branch (LMW, 7/26)
The claims have traded with and without the right to participate in the rights offering, a trader said. Claims with rights traded around 21 1/2, while ex-right claims have traded two-and-a-half points below. Air Canada's equity is currently quoted in the 40's range from the 23-26 context it was quoted last week, a trader said. "It is definitely an equity play," another dealer said. "It will basically come down to what people think the equity will be worth in the next two or three years," he noted.
Deutsche Bank won another $9 million claims auction that took place in the beginning of the week. The winning bid was approximately 15 1/2, a dealer said. The seller could not be determined. Additional pieces of Air Canada's trade claims also changed hands in the 21 1/2-24 context after the creditors approval came. The dealer said a volume of $250 million has traded so far.