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Air Canada bailed out by Hong Kong tycoon

"Given the success of Victor Li in his global business endeavors, we look forward to the opportunity to benefit from his participation in fully realizing Air Canada's true potential."

Robert Milton, Air Canada CEO

Air Canada has secured a C$1.1 billion (US$831 million) bailout package from one of Hong Kong's wealthiest businessmen and a rights offering to lift the airline out of bankruptcy protection.

Victor Li (李澤鉅) of Hong Kong's Cheung Kong (Holdings) Ltd is to invest C$650 million (US$491 million) in an equity while another C$450 million (US$340 million) from a rights offering is to be backed by Deutsche Bank, the airline said in a statement over the weekend.

Victor Li is son of Asia's richest businessman Li Ka-shing (李嘉誠).

Li's investment under the name Trinity Time Investments represents 31 percent of the common equity in the restructured airline.

WIDESPREAD INTERESTS

Li is a Canadian citizen based in Hong Kong whose family holds controlling interests in Cheung Kong as well as such other widely held companies as Hutchison Whampoa Limited (和計黃浦), Hongkong Electric Holdings Limited, and Husky Energy, a Canadian oil producer and gasoline marketer.

The Cheung Kong Group ranks among the top 100 corporations in the world, with businesses in close to 40 countries and over 165,000 employees, the Air Canada statement said.

The airline's board of directors approved the deal over the weekend.

"Given the success of Victor Li in his global business endeavors, we look forward to the opportunity to benefit from his participation in fully realizing Air Canada's true potential," chief executive Robert Milton said in a statement.

Li was chosen as equity partner over Cerberus Capital Management LP of New York, an asset management firm with Canadian interests.

Air Canada was granted bankruptcy protection April 1 to restructure itself as a leaner operation, with fewer aircraft and thousands of fewer workers.

Trinity spokesman Frank Sixt said Air Canada had a solid restructuring plan for bouncing back.

"We have full confidence in the company's senior management team, and will continue to work with them over the coming months to complete the steps which will reshape Air Canada into a leading competitor in the air transportation sector globally," Sixt said.

The airline's creditors will be able to acquire new shares on the same economic terms as Trinity, the statement said.

The board of the new Air Canada will have 11 members of whom five will be designated by Trinity, two by Deutsche Bank, two members of management and two others by a selection committee which will include a representative of creditors.

Executive pay packages are to be frozen, but a stock option program is to be initiated.

GOVERNMENT APPROVAL

Milton and Calin Rovinescu, executive vice president to implement Air Canada's business plan, will receive from Trinity's own holdings one percent each of new equity vesting in stages over four years.

Under the agreement to be closed by April 30, next year, the airline will pay Trinity certain closing fees and reimburse Trinity for other expenses until closing.

Once the deal closes, Air Canada won't be able to solicit competing proposals for an equity plan sponsor.

The bailout must fall within Canadian law governing ownership of the country's dominant airline. Foreign companies are not allowed to hold more than a 25 percent voting stake in Air Canada.
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