(Adds shares)
April 29 (Reuters) - Struggling Canadian tour operator Transat AT TRZ.TO said on Thursday it would borrow up to C$700 million ($569.71 million) from the Canadian government and use a portion of the funds to reimburse customers whose travel plans had to be canceled.
Shares of the company were up 5.5% at C$4.78 in morning trade.
The news comes barely a day after Reuters reported that Transat was close to reaching a financial aid deal with the federal government involving a loan. company was already struggling due to the COVID-19 pandemic when Air Canada AC.TO dropped its merger plans with the company earlier this month, creating uncertainty for the Montreal-based operator of leisure carrier Air Transat.
Transat said it would use C$390 million to support the company's liquidity needs until its business has recovered enough to generate cash and the rest to reimburse travelers. company said it would issue 13 million warrants to the government for buying an equal number of its shares at $4.50 per stock, a discount of about 1% to Transat's closing price on Wednesday.
The warrants would vest in proportion to the funds drawn by Transat, and 50% would be forfeited if the loan were to be repaid in full in the first year, it said. When exercised, the dilution for stockholders from the warrants is up to 26%.
Transat has suspended flights until June due to pandemic restrictions that have battered travel and has said it needs at least C$500 million in financing this year.
It has repayment obligations due on April 29 for a C$50 million revolving facility and a C$250 million short-term loan that matures on June 30. ($1 = 1.2287 Canadian dollars)