Aeroplan's income fund IPO details announced

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By: Wise Marketer Staff |

Posted on June 23, 2005

Aeroplan's income fund IPO details announced

In what is claimed to be the first monetisation of a frequent flyer programme, the Aeroplan Income Fund is to sell 25 million units of the Fund at Can$10 per unit, valuing Aeroplan at some Can$2 billion.

ACE Aviation Holdings,(ACE) and Aeroplan Limited Partnership (Aeroplan LP) have announced that Aeroplan Income Fund (the Fund) entered into an agreement with a group of underwriters to sell 25 million units of the Fund at a price of Can$10 per unit priced as part of its initial public offering of units.

According to Robert Milton, Chairman, President and CEO, ACE Aviation Holdings, "We are extremely pleased to see the market valuing Aeroplan at Can$2 billion, making it one of Canada's largest business trusts and the first-ever monetisation of an airline frequent flyer programme."

30 day option The Fund has granted the underwriters an option to purchase up to an additional 3.75 million units at the offering price for a period expiring 30 days following the closing to cover over-allotments, if any, and for market stabilization purposes.

The Fund will acquire and own a 12.5% (14.4% assuming full exercise of the overallotment option) ownership interest in the Aeroplan LP. Aeroplan LP will retain approximately $100 million of the net proceeds of the offering to partially fund a reserve for Aeroplan Mile redemptions and for certain capital expenditures, and will distribute the balance of the net proceeds to ACE in the amount of approximately Can$125 million (Can$160 million assuming full exercise of the overallotment option). ACE will use the proceeds for general corporate purposes and will retain control of Aeroplan LP.

The units are expected to provide a cash-on-cash yield of 7% annually, based on the initial public offering price. Distributions will be paid monthly. The first distribution is expected to be paid on or before August 15, 2005 to Unit holders of record on July 29, 2005.

TSX listing The Fund has received conditional approval for the listing of its units on the Toronto Stock Exchange, subject to fulfilling all of the requirements of the Exchange. The underwriting syndicate is being co-led by RBC Capital Markets, sole book runner, CIBC World Markets and Genuity Capital Markets.

In connection with the offering, a commitment letter has been entered into by Aeroplan LP with the Royal Bank of Canada as underwriter and lead arranger in respect of the establishment of $475 million senior secured syndicated credit facilities subject to the satisfaction of certain customary conditions including the completion of the offering. Approximately $300 million of this will be used to fund the balance of the reserve for Aeroplan mile redemptions.

After completion of the offering, ACE will continue to hold the remaining 87.5% (85.6% assuming full exercise of the overallotment option) of the outstanding LP Units.

Not for the US The securities offered have not been, and will not be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or any applicable exemption from the registration requirement of such Act.

Five million members Aeroplan has some five million active members, who can accumulate Aeroplan Miles through a network of more than sixty commercial partners, representing more than 100 brands, in the financial, retail and travel sectors. They can redeem those miles for rewards, including airline seats, other travel rewards such as hotel rooms and car rentals, selected electronics merchandise and a diversified selection of experiential and specialty rewards.

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