Chorus Aviation Inc. ('Chorus') (TSX: CHR) is pleased to announce that it has entered into an agreement with CIBC Capital Markets and RBC Capital Markets, as joint bookrunners, on behalf of a syndicate of underwriters consisting of Scotiabank, National Bank Financial Inc., TD Securities Inc., BMO Capital Markets, Canaccord Genuity Corp., Cormark Securities Inc. and Paradigm Capital Inc. (collectively, the ‘Underwriters’), under which the Underwriters have agreed to purchase $75 million aggregate principal amount of senior unsecured debentures due December 31, 2024 (the ‘Debentures’) at a price of $1,000 per Debenture (the ‘Offering’). Chorus has also granted the Underwriters an option to purchase up to an additional $11.25 million aggregate principal amount of Debentures, on the same terms and conditions, exercisable in whole or in part, for a period of 30 days following the closing of the Offering.
The Debentures will bear interest from the date of issue at 5.75% per annum, payable semi-annually in arrears on June 30 and December 31 of each year commencing June 30, 2020, and will mature on December 31, 2024.
The net proceeds of the Offering will be used to fund the growth of Chorus Aviation Capital (Chorus’ aircraft leasing business), including the acquisition of aircraft intended for or currently on lease to third parties, as well as for working capital requirements and other general corporate purposes.
The Debentures will not be redeemable by Chorus before December 31, 2022, except upon the occurrence of a change of control of Chorus in accordance with the terms of the indenture governing the Debentures (the ‘Indenture’). On and after December 31, 2022 and prior to December 31, 2023, the Debentures will be redeemable, in whole or in part, at Chorus’ option at a price equal to 102.875% of the principal amount of the Debentures redeemed plus accrued and unpaid interest. On and after December 31, 2023, the Debentures will be redeemable at Chorus’ option at a price equal to the principal amount of the Debentures redeemed plus accrued and unpaid interest. Chorus will be required to provide not more than 60 nor less than 40 days’ prior notice of redemption of the Debentures.
Subject to any required regulatory approval and provided no event of default has occurred and is continuing under the Indenture, Chorus will have the option to satisfy its obligation to pay the principal amount of the Debentures due at redemption or maturity (together with any applicable premium) by delivering freely tradeable Class B Voting Shares (‘Class B Shares’) to holders of the Debentures (‘Debentureholders’) who are Canadians (as defined in the Canada Transportation Act (‘Qualified Canadians’) or Class A Variable Voting Shares (‘Class A Shares’ and, together with the Class B Shares, the ‘Voting Shares’) to Debentureholders who are not Qualified Canadians. Any accrued and unpaid interest will be paid in cash. In such event, payment will be satisfied by delivering for each $1,000 due, that number of freely tradeable Voting Shares obtained by dividing $1,000 by 95% of the current market price (determined in accordance with the Indenture) on the date fixed for redemption or maturity. The Debentures will not be convertible into Voting Shares at the option of the Debentureholders at any time.
The Debentures will be direct, senior unsecured obligations of Chorus and will rank: (i) subordinate to all existing and future senior secured and other secured indebtedness of Chorus, but only to the extent of the value of the assets securing such secured indebtedness; (ii) pari passu with one another and equally in right of payment from Chorus with all other unsubordinated unsecured indebtedness of Chorus except as prescribed by law; and (iii) senior to any other existing and future subordinated unsecured indebtedness of Chorus.
An agreement (the ‘Intercreditor Agreement’) will be entered into between the trustee (the ‘Trustee’) appointed under the Indenture, on behalf of the Debentureholders, and Chorus’ lender(s) (the ‘Senior Creditors’) under certain credit facilities made available pursuant to a second amended and restated credit agreement dated June 28, 2019 (as further amended, the ‘Credit Facilities’). The Intercreditor Agreement will, among other things, provide that to the extent any amounts remain outstanding under the Credit Facilities after the Senior Creditors have realized on their security in the context of an insolvency event involving Chorus, any proceeds received by the Trustee on behalf of the Debentureholders in connection with such event will be directly remitted to the applicable Senior Creditors until the applicable Credit Facilities are paid in full.
A preliminary short form prospectus qualifying the distribution of the Debentures will be filed with the securities regulatory authorities in each of the provinces and territories of Canada. The Debentures have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
The Offering is subject to customary regulatory approvals, including approval of the Toronto Stock Exchange. The Offering is expected to close on or about December 6, 2019.