Transat pushes back as Péladeau moves to halt debt restructuring deal

Six years after offering to purchase Transat A.T., Pierre Karl Péladeau is back in the spotlight—this time seeking a court order to halt the agreement that recently enabled the company to restructure its debt.

If the agreement goes ahead, there will be a "transfer of control" of the company "to the federal government," which is already its main creditor, argues the businessman, who is still a shareholder in Air Transat's parent company.

As reported in La Presse, Péladeau says he holds, through his company La Financière Outremont, approximately 3.8 million shares, or about 9.5 per cent of the Montreal-based company's shares.

This makes Péladeau the third-largest shareholder in Transat, behind the Fonds de solidarité FTQ (11 per cent) and Letko, Brosseau & Associés (9.6 per cent).

The controlling shareholder of Quebecor filed an application for an injunction with the Quebec Superior Court on Friday (June 27).

"Transat's strategy raises questions of compliance and transparency," the 19-page motion states.

Transat claims the allegations are "without merit" and that it intends to "vigorously contest them and seek dismissal of the injunction application."

On June 5, Transat A.T reached an agreement in principle in principle with Canada Enterprise Emergency Funding Corporation (CEEFC) for the restructuring of the debt it incurred under the Large Enterprise Emergency Funding Facility (LEEFF) program during the pandemic.

As reported, it’s $772 million debt from federal COVID-19 relief loans will be cut nearly in half—to $334 million—thanks to a series of financial transactions.

What appears to bother Péladeau is that a portion of the company’s debt can be converted into preferred shares. This setup could ultimately give the CEEFC ownership of nearly 20 per cent of Transat. If that happens, Ottawa would become both Transat’s main creditor and its largest shareholder.

"The result of the unilateral restructuring of the company's debt will effectively result in the transfer of control of the company to the federal government," writes Péladeau.

Péladeau expressed interest in acquiring Transat back in 2019. When the proposed merger collapsed in the spring of 2021, Mr. Péladeau eventually dropped his own plans to purchase Transat.

In reaction to Péladeau’s injunction request, Transat, in a June 27 press release, issued a statement highlighting the advantages of the deal., insisting Ottawa would not gain any control over the company.

“At no time will the exercise of Warrants or conversion of Preferred Shares result in CEEFC beneficially owning more than 19.9 per cent of the common shares, and therefore, CEEFC will not exert control over the Corporation,” Transat clarified.

Transat AT believes the allegations made by Financière Outremont are “unfounded” and intends “to contest them vigorously and seek dismissal of the Injunction Application.”

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