TORONTO (AP) – A Canadian appeals court refused an Air Canada creditor’s request Wednesday to keep the insolvent airline from accepting a major equity investment from Hong Kong businessman Victor Li.
Mizuho International, a hedge fund holding $63 million in Air Canada debt, had wanted the court to block a lower court’s approval of the deal with Li.
But Justice Robert Blair ruled Wednesday that the court should intervene only sparingly in bankruptcy proceedings, and that Mizuho’s appeal did not merit involvement.
“In our view, the test has not been met in this case,” Blair said in an unanimous decision by the three-judge panel.
Mizuho, a London hedge fund subsidiary of Japanese bank Mizuho Financial Group, had argued that the judge overseeing Air Canada’s restructuring should have waited until New York investment firm Cerberus Capital made its final offer before approving the airline’s deal with Li on Dec. 8.
Cerberus’ proposal was delivered two days later to the Air Canada board and to the court-appointed monitor overseeing the restructuring, but creditors and the public have been given no details.
Mizuho believes the Cerberus bid would give creditors about $725 million more than the Trinity offer provides – a claim Air Canada disputes.
Blair said installing an equity investor is only one of many steps in the airline’s restructuring, and “this process has been supported by the monitor and been bought into by all stakeholders, including Mizuho.”
If the appeals court had ruled against approval of the equity proposal, it might have jeopardized Li’s offer. Trinity Time has an option to cancel the deal if it doesn’t receive final court approval by Saturday.
Li’s offer under the banner Trinity Time Investments would inject $488-million, giving him 31 percent of Air Canada, plus a $338 million rights offering led by Deutsche Bank.
Cerberus had previously proposed taking an 11.9 percent stake in the airline for $188 million and given creditors the right to buy $638 million worth of Air Canada shares.
Trinity has said the Cerberus bid is more speculative than its proposal and would face obstacles from Canada’s limits on foreign ownership of airlines. Li is a Canadian citizen, so a Trinity would be considered a domestic investment.
