Air Canada


In connection with the CCAA proceedings of Air Canada, our firm was engaged to represent the holders of subordinated perpetual debt issued by Air Canada (“Perpetual Debt”).  These debtholders consisted primarily of large Japanese financial institutions that had made their investments shortly after Air Canada was privatized.

Because the Perpetual Debt was fully subordinated to senior debt that would not be repaid in full pursuant to the plan of arrangement being proposed by Air Canada, the position of our clients was very precarious.

After being engaged to act in this matter, we took steps, against the objections of other creditors, to cause a representative of our client to be added as a member of the ad hoc unsecured creditors committee (the “Committee”) since the Perpetual Debt represented claims against Air Canada in excess of $1 Billion.  Our firm also aggressively asserted that the holders of Perpetual Debt should be placed in a distinct class of creditors to avoid being overwhelmed by the claims of the senior debtholders.

After numerous court hearings and negotiations, we succeeded in concluding a highly favourable agreement between the holders of Perpetual Debt and the other members of the Committee that provided for a distribution to our clients under the plan of arrangement equivalent to 26% of the aggregate distribution that would otherwise have been made to them if they had not been fully subordinated.

After concluding the agreement with the other members of the Committee, the Monitor and Air Canada agreed to amend the restructuring plan to incorporate the terms of this settlement.  However, major senior debtholders, including the Greater Toronto Airports Authority, vociferously contested the agreement on the basis that the subordinated debtholders were not entitled to any distribution.  The matter was litigated before the Ontario Superior Court of Justice and the CCAA Judge found in our favour and approved both the terms of the agreement and the amendment of the plan of arrangement to incorporate the distribution terms related to the Perpetual Debt.

In addition to our successful representation of a vulnerable stakeholder group, we were then called upon by the largest holder of Perpetual Debt to conduct an auction with a view to selling its claims prior to the plan implementation. The auction involved some of the largest U.S. investment banks and was very successful, which resulted in our client achieving a significant recovery.

Air Canada, Re, 2004 CanLII 34416 (ON SC)