Chorus Aviation, the parent company of Jazz Aviation, has agreed to sell its regional aircraft leasing segment to HPS Investment Partners for about US$1.9 billion.
The announcement was made on July 30, 2024. According to Chorus, the company’s goal is to cover both corporate debt and debts related to aircraft.
The deal will allow Chorus to get rid of US$1.7 billion in financing, which consists of US$814 million in cash debt and US$1.1 billion in debt related to aircraft. The sale will reduce the company’s leverage ratio by half, from 3.6x to 1.8x.
“This transaction will allow us to significantly reduce our debt and corporate financings, leaving Chorus with strong and predictable free cash flows from our long-term contracts,” Colin Copp, President and Chief Executive Officer of Chorus, said in a press release. “That will enable us to implement a sustainable return of capital program for our common shareholders and invest in future growth.”
He added: “We will leverage our deep operational expertise and capabilities to focus our growth on aviation services, as demonstrated by recent growth in Voyageur’s business.”
Brookfield Asset Management and Air Canada, Chorus’ biggest investors with around 13.2% and 8.1% of shares respectively, have approved the agreement.
“We support the decision to sell the RAL segment, which allows the company to execute on its strategic plans, and we appreciate management’s efforts in negotiating a favorable transaction for Chorus,” commented Frank Yu, a Managing Partner in Brookfield’s Special Investments program.
Following the debt payments, the company expects a 29% increase in free cash flow.
The deal is expected to close by the end of 2024.