Former Parent Company Of Air Canada Seeks To Dissolve Operations

 

 
 
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Former Parent Company Of Air Canada Seeks To Dissolve Operations

By Eddy Metcalf
 

February 13, 2012 - ACE Aviation Holdings Inc. (ACE) reported full year and fourth quarter results for 2011 and announced its intention to seek shareholder approval for its winding-up, the distribution of its remaining net assets and ultimately its dissolution in the future. 

ACE Aviation Holdings Inc. is a Canadian holding company that provides commercial airline service and technical support and was the parent company of Air Canada from 2004 until 2006. It is headquartered in Montreal. The company was created as Air Canada emerged from bankruptcy in 2004. One of the more significant changes was the merging of its small airlines into Air Canada and Air Canada Jazz. 

At the beginning of the year, ACE began preparing its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"), with retroactive restatement of comparative figures for 2010. In 2011, ACE adopted new accounting standard IFRS 9 - Financial Instruments. This required further changes to the 2010 comparative figures. 

For 2011, ACE recorded a loss and reduction in net assets in liquidation of $90 million. This includes unrealized losses of $76 million and $5 million respectively on ACE's investment and warrants in Air Canada. In the fourth quarter of 2011, ACE recorded a loss and reduction in net assets in liquidation of $21 million. This includes unrealized losses of $15 million and $1 million respectively on ACE's investment and warrants in Air Canada. 

ACE recorded income of $35 million in 2010, which included a gain on the sale of ACE's investment in Air Canada of $26 million, unrealized gains of $15 million on the investment, ACE's proportionate share of Air Canada's loss, after adjustments, of $14 million and an unrealized gain of $5 million on ACE's warrants in Air Canada.

In the fourth quarter of 2010, ACE recorded income of $61 million. This included a gain on the sale of ACE's investment in Air Canada of $26 million, unrealized gains of $15 million on the investment, ACE's proportionate share of Air Canada's income, after adjustments, of $21 million and an unrealized gain of $2 million on ACE's warrants in Air Canada. 

On January 31, 2012, ACE's net assets amounted to $384 million or $11.83 per share. ACE's underlying assets are cash and cash equivalents of $356 million; 31 million Class B Voting Shares in Air Canada which had a market value of $33 million based on the January 31, 2012 closing price on the TSX; and 2.5 million warrants for the purchase of Air Canada Class B voting shares at exercise prices of $1.44 (1.25 million warrants) and $1.51 (1.25 million warrants) per share which had a nominal value. 

 

At that date, ACE also had total payables and accrued liabilities of $5 million, principally related to taxes. In March 2010, ACE applied for Certificates of Discharge from the Canada Revenue Agency ("CRA") and Revenu Quebec. 

Since then, ACE has been actively assisting the CRA and Revenu Quebec with their audits of ACE's income tax returns for the years 2005 to 2010. In addition to the audits of income tax returns, ACE has been assisting with audits in respect of other taxes. The audits of income tax returns required a detailed review of all of the significant corporate transactions undertaken by ACE since its incorporation in 2004, together with a detailed review of all of its returns. 

The audits of income taxes and other taxes are now substantially complete and additional reassessments of $4 million are anticipated in Quarter 1, 2012. This amount has been accrued as at December 31, 2011. On the basis of the information available, it is ACE's current expectation that the Certificates of Discharge will be issued in the near future. 

ACE will seek shareholder approval to wind up, distribute its net assets and ultimately dissolve. A shareholders meeting will be held on April 25, 2012 and shareholders of record as of March 6, 2012 will be entitled to receive notice of and to vote at the meeting.

 
   

ACE intends to make an initial distribution to its shareholders of an aggregate amount between $250 million and $300 million, within the weeks following the shareholders meeting, on a date to be determined by the board of directors. The final distribution to shareholders will not occur earlier than mid-year 2013 in order to allow that any remaining contingent liabilities be settled or otherwise provided for. The distributions will generally be treated as deemed dividends from a Canadian tax standpoint.

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