Carson Air (CRN, Kelowna) and PAL Airlines (Canada) (PB, St. John's) are to get a shot in the arm thanks to a CAD150 million (USD112.4 million) bought deal offering of common shares by their parent, Exchange Income Corporation (EIC).
"The net proceeds of the offering will be used to fund the corporation's growth initiatives, including partially funding the investments associated with recent announcements at Carson Air and PAL Airlines, and for general corporate purposes," EIC said in a statement.
British Columbia recently awarded Carson Air a CAD200 million (about USD150 million) ten-year-plus contract to provide fixed-wing medevac coverage for the whole province, which previously was divided into multiple contracts with different suppliers. The deal requires a fleet of new Beech (twin turboprop) King Airs and a full motion simulator for pilot training. EIC has contracted directly with the OEM and purchased production slots to meet the province's timelines. The aircraft will be modified with medical interiors and phased into service once the conversions are complete.
Meanwhile, PAL Airlines will provide regional services in eastern Canada for Air Canada (AC, Montréal Trudeau). This follows a Letter of Intent (LOI) for a commercial agreement signed on May 30, subject to final negotiations between the parties. It will see PAL Airlines acquire up to six additional DHC-8-Q400s to be operated under the Air Canada Express brand for up to five years on regional routes in eastern Canada. PAL Airlines already operates a fleet of 20 aircraft, including seven Dash-8-Q400s, three DHC-8-Q300s, one DHC-8-300, three DHC-8-100s, and six DHC-6-300s, the ch-aviation fleets module reveals.
"EIC is excited about the opportunities created by our two most recently announced growth initiatives, our long-term medevac contract with the Province of British Columbia and our proposed agreement with Air Canada to continue to expand our service offering at PAL Airlines. This financing provides the financial flexibility to pursue those initiatives as well as a number of other exciting opportunities currently being evaluated," stated EIC Chief Executive Officer Mike Pyle.
Due to strong demand, on June 7, EIC revised an agreement with a syndicate of underwriters co-led by CIBC Capital Markets and National Bank Financial Inc. to increase the size of a bought deal treasury offering previously announced on June 6. Under the revised agreement, EIC agreed to sell, on a bought-deal basis, 2,875,000 common shares from the treasury. The shares will be offered at a price of CAD52.25 (USD39.15) per share for gross proceeds to EIC of about CAD150,218,750 (USD112,562,442).
EIC has also granted the underwriters an option to purchase up to an additional 431,250 shares, representing 15% of the size of the offering, on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the offering. If the over-allotment option is exercised in full, the corporation will receive additional gross proceeds of CAD22,532,813 (USD16,884,851) for aggregate gross proceeds from the offering of CAD172,751,563 (USD129,450,527).
The offering is expected to close on or about June 14, 2023. It is subject to customary regulatory approvals, including Toronto Stock Exchange approval of the share listing. The shares will not be registered under the US Securities Act and, accordingly, not offered or sold in the US.
A bought deal offering of common shares is a type of securities offering in which an underwriter purchases securities from an issuer before a preliminary prospectus is filed. The issuer company is alleviated of financing risk as the underwriter commits to buying the entire offering from the client company, ensuring that it will raise the intended amount.
