Pierre Karl Peladeau mulls next steps in Transat takeover, slams debt deal

Quebec billionaire Pierre Karl Peladeau is continuing his efforts to acquire Transat A.T, maintaining that the travel company’s recent balance-sheet adjustments still result in excessive debt.

“It’s not over until it’s over,” Peladeau told Bloomberg News in a recent interview. “The company will require another restructuring. They cannot live with that, or if they live with that, they will be impaired in their capacity to develop the business.”

Debt drama

Transat has not commented on Peladeau’s comments or considerations.

However, the Montreal-based company has taken recent steps to refinance the debt it accumulated during the pandemic, a time when it had to secure emergency funding from the Canadian government.

As previously reported, the government agreed to reduce Transat’s debt by around $440 million. The remaining debt was restructured into a credit facility, a 10-year debenture and convertible preferred shares, the latter of which would give Ottawa a 19.9 per cent voting stake if converted to common shares.

READ MORE: Transat restructures pandemic-era LEEFF debt

Peladeau, who holds just over nine percent of Transat, is unhappy with this. His family office, Financiere Outrement, with advice from Canaccord Genuity Group Inc., proposed an offer of $2.64 per share, contingent on reaching a debt agreement with the Canadian government. Transat declined the offer.

Peladeau, who is the president and CEO of Quebecor Inc, attempted to block the deal through legal action, claiming Transat should have consulted its shareholders.

"Transat's strategy raises questions of compliance and transparency," read a 19-page motion that was filed with the Quebec Superior Court on June 27.

Transat claimed the allegations were "without merit,” and a judge ultimately ruled in favour of the company, which argued that the urgency of the situation justified bypassing shareholder approval.  

By the end of April, before the debt restructuring, Transat carried a net debt and lease liability of $1.7 billion.

Since the debt restructuring was announced in June, Transat shares have jumped over 70 per cent to $2.82, bringing the company’s market value to $117 million.

Peladeau argued the stock should have climbed higher. “The market is saying it doesn’t work,” he told Bloomberg.

PKP’s next move?

What’s the billionaire’s next move? He has, after all, expressed interest in acquiring Transat for several years now, going back to 2019 when the company was first up for sale.

“I need to reconsider the situation,” Peladeau told Bloomberg.

He believes Transat’s restructuring brings a fundamental issue to light.

“Should the Canadian government be the largest shareholder of an airline, which is regulated by the government? So if I’m an American and I look at this, I say: What’s wrong here?” he told the outlet.

Court documents showed that Transat formed a special committee in September to explore options for restructuring its debt, the Financial Post points out.

By January, a formal solicitation process was underway, with 49 potential investors contacted. Only two bidders, one being Peladeau’s family office, advanced to the final stage—neither offering any equity value.

Ultimately, the Canadian government agreed to proceed with the refinancing.

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