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AIR CANADA AND AIR PARTNERS, L.P. MAKE OFFER TO INVEST US$400 MILLION IN CONTINENTAL AIRLINES

 AIR CANADA AND AIR PARTNERS, L.P. MAKE OFFER
 TO INVEST US$400 MILLION IN CONTINENTAL AIRLINES
 MONTREAL, Aug. 27 /PRNewswire/ -- Air Canada and Air Partners, L.P., a Texas limited partnership, today submitted an offer to invest a total of US$ 400 million in a restructured Continental Airlines. Under the proposal, the investors would provide $100 million of equity and would purchase or place $300 million of debt securities.
 The transaction is intended to position the new, recapitalized Continental as a healthy participant as the airline industry returns to profitability. Air Canada's participation creates a strong North American airline alliance to the benefit of Continental and Air Canada investors, creditors and employees as well as the travelling public. Continental would operate as an independent carrier headquartered in Houston.
 According to the terms of the investment, Air Partners would purchase securities representing an initial 41 percent voting interest and a 29 percent equity interest. Air Canada would purchase securities representing an initial 24 percent voting interest and a 29 percent equity interest. Air Canada has the right to increase its voting participation consistent with any future relaxation of U.S. foreign ownership controls.
 Under the plan of reorganization to be filed pursuant to the offer, creditors and other parties would receive initial equity securities representing 35 percent of the voting and 42 percent of the equity interest in Continental. Air Canada and Air Partners would also receive warrants which would allow each to purchase additional shares of common stock of Continental in the future. Air Canada and Air Partners would each account for five members of the 16 directors on the board.
 The offer is subject to acceptance by the directors of Continental Holdings, Inc. and to various conditions including the approval of the U.S. Bankruptcy Court and U.S. regulatory authorities. No regulatory approvals are required in Canada or other jurisdictions. Air Canada's participation has been structured to meet current regulations concerning the foreign ownership of U.S. airlines. The transaction could be consummated in the first quarter of 1993.
 Air Canada, fully-privatized since 1989, is the largest airline in Canada, providing passenger services to 92 North American cities and 22 cities in Europe and the Caribbean. Air Canada flew 13.7 billion revenue passenger miles in 1991 and generated revenues of CDN$ 3.6 billion. Air Canada is being advised in this transaction by Lehman Brothers.
 Air Partners is a private investment group led by Texas investors David Bonderman and James Coulter. They are experienced investors with a track record of completing complex corporate transactions and enhancing corporate value. Air Partners and Air Canada have been working together for some months to design and structure the transaction.
 With 42,000 employees, Continental Airlines is the fifth largest airline in the U.S., providing passenger service to 114 U.S. destinations and 54 international destinations. Continental flew 44 billion revenue passenger miles and generated $5.1 billion of revenues in 1991. The carrier filed for Chapter 11 protection in December 1990. Emerging from bankruptcy proceedings, the new Continental, with its debt load reduced by over $4 billion and its low unit costs, would be strongly positioned within the industry.
 "Continental had made great strides in establishing dependable and friendly customer service and continues to gain support from travelers," said Hollis L. Harris, Air Canada's vice chairman, president and chief executive officer. "It is a win-win situation since both companies will benefit from synergies in such areas as network coordination, information systems and maintenance."
 Air Canada and Air Partners believe that the offer, which is the only offer that combines established financial and airline resources, is superior to the existing conditional agreement between Continental and the Maxxam Group, Inc., for reasons that include the following:
 - The offer represents a long-term commitment to the airline industry and to Continental by an investor group which benefits from Air Canada's participation as a strategic airline industry partner.
 - Air Canada proposes to enter into commercial agreements to create a strategic alliance and to share resultant synergy benefits between Air Canada and Continental. This alliance would bring significant long-term value to Continental which is not and cannot be offered by Maxxam.
 - The offer represents an equity infusion four times larger than that offered by Maxxam.
 - The offer values the interest of creditors and other constituencies at a level more than two and one-half times higher than the Maxxam plan.
 - The offer totals $400 million versus $350 million for the Maxxam plan.
 - The fees payable by Continental in the event of non-acceptance of the proposal or an overbid are less onerous in this offer than in the Maxxam plan.
 "Air Canada's proposed investment is a further step in the implementation of our long-term strategy. It would enhance our strategic options and position us to take advantage of the opportunities of the impending liberalization of air travel in North America,'' said Harris.
 -0- 8/27/92
 /CONTACT: Owen Blicksilver of Air Partners, 212-546-2240; or Denis Couture of Air Canada, 514-422-5921/ CO: Air Canada; Air Partners, L.P.; Continental Airlines ST: Quebec, Texas IN: AIR SU:


LR -- NY013 -- 3778 08/27/92 08:39 EDT
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Publication:PR Newswire
Date:Aug 27, 1992
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