Cargojet Inc. has entered into an agreement with a syndicate of underwriters co-led by RBC Capital Markets, CIBC Capital Markets and Scotiabank.
The underwriters have agreed to purchase C$100 million aggregate principal amount of listed senior unsecured hybrid debentures due June 30, 2026 (the “Debentures”) at a price of C$1,000 per Debenture (the “Offering”).
Cargojet has also granted the underwriters an option to purchase up to an additional C$15 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 closing of the Offering. The Offering is expected to close on or about July 16, 2020.
The Debentures will be direct, senior unsecured obligations of the Corporation and will rank subordinate to all existing and future senior secured and other secured indebtedness of the Corporation, and will rank pari passu with all existing and future senior unsecured, and other unsecured and unsubordinated indebtedness of the Corporation.
The Debentures will rank pari passu with the Corporation’s 5.75% listed senior unsecured hybrid debentures due April 30, 2024 and the Corporation’s 5.75% listed senior unsecured hybrid debentures due April 30, 2025. The Debentures will bear interest at a rate of 5.25% per annum, payable semi-annually in arrears on June 30 and December 31 of each year, with the first interest payment on December 31, 2020. The December 31, 2020 interest payment will represent accrued interest from the closing of the Offering, to but excluding December 31, 2020. The Debentures will mature on June 30, 2026 (the “Maturity Date”).
The Debentures will not be redeemable by the Corporation prior to June 30, 2023 (the “First Call Date”), except in certain circumstances upon the occurrence of a change of control of the Corporation in accordance with the terms of the indenture (the “Indenture”) governing the Debentures.
On or after the First Call Date and prior to June 30, 2024, the Debentures may be redeemed by the Corporation, in whole or in part from time to time, at a redemption price equal to 103.9375% of the principal amount of the Debentures redeemed plus accrued and unpaid interest, if any, up to but excluding the date set for redemption.
On or after June 30, 2024 and prior to June 30, 2025, the Debentures may be redeemed by the Corporation, in whole or in part from time to time, at a redemption price equal to 102.625% of the principal amount of the Debentures redeemed plus accrued and unpaid interest, if any, up to but excluding the date set for redemption.
On and after June 30, 2025 and prior to the Maturity Date, the Debentures may be redeemed in whole or in part at the option of the Corporation at a price equal to their principal amount plus accrued and unpaid interest, if any, up to but excluding the date set for redemption. The Corporation shall provide not more than 60 nor less than 40 days’ prior notice of redemption of the Debentures. The Corporation has the option to satisfy its obligations to repay the principal amount of the Debentures due at redemption or maturity by issuing and delivering that number of freely tradeable Common Voting Shares and/or Variable Voting Shares, as applicable, in accordance with the terms of the indenture governing the Debentures.
The Corporation intends to apply the net proceeds of the Offering to pay down the Corporation’s revolving credit facility to free up capacity to fund future anticipated capital expenditures, including the purchase of aircraft.
A preliminary short form prospectus will be filed with securities regulatory authorities in all provinces and territories of Canada. The Offering is subject to customary regulatory approvals, including the approval of the Toronto Stock Exchange.
The securities to be offered 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.