Losing airline Transat AT Inc. got another government loan to stay afloat.
Montreal-based Transat TRZ-T will borrow $100 million from the federal government’s Canada Business Emergency Financing Corporation (CEEFC) in addition to the $743 million it has borrowed since 2021.
Transat said the deal announced Friday includes an additional line of credit worth $50 million, subject to the airline raising an additional $50 million from a third party. Transat also indicated that its lenders have agreed to extend credit maturities by one year to April 2024 and to push back certain financial conditions until October 2023.
Annick Guérard, chief executive of Transat, said in a press release that the arrangements will strengthen the airline’s financial position. “This important financing step, combined with sales that have performed well over the past few months, will give us the financial flexibility to deploy our strategic plan with optimism and confidence,” said Ms. Guérard.
CEEFC is providing the emergency loans, known as the Large Employer Emergency Financing Facility (LEEFF), to support businesses that have seen their sales plummet due to the pandemic. Recipients must pledge to minimize job losses, eliminate dividends and stock buybacks, and cap executive compensation.
Eighty percent of the five-year loan carries an interest rate of 5 percent in the first year, 8 percent in the second year, and an increase of 2 percent each year thereafter. Transat and other beneficiaries also had to issue warrants giving the government the right to buy up to 15% of the company’s shares.
Transat is the only company to apply for LEEFF assistance in the past year, and the loan program has been closed since July 29, the Canada Business Emergency Fund said. “Thanks to the first LEEFF loan granted to Transat in April 2021, thousands of Canadian jobs have been protected and the company has been able to maintain its operations,” the lender said.
Seven companies received LEEFF loans, including Air Canada, Sunwing Vacations Ltd., Porter Airlines and Goodlife Fitness Centers Inc. Air Canada was the largest borrower, approved for $1.4 billion to reimburse customers whose flights were canceled during the pandemic. Air Canada, at the end of 2021, terminated a credit facility worth $3.975 billion. The government also invested $500 million in Air Canada at $23.18 per share. Air Canada shares were trading at around $17.20 on Friday.
During the last quarter, which ended April 30, Transat lost $98 million, or $2.60 per share, compared to a loss of $69 million, or $1.84 per share, a year earlier.
Revenue rose to $358.2 million from $7.6 million a year ago as travelers shrugged off pandemic concerns and returned to the skies. However, Transat continued to burn cash at the rate of $3 million per month.
Your time is valuable. Receive the Top Business Headlines newsletter in your inbox morning or evening. register today.