Transaction to unlock significant embedded equity value for common shareholders¹ and position Chorus for the future

• Sale price of $1.9 billion to unlock embedded equity value in the Regional Aircraft Leasing (“RAL“) segment, with net proceeds of $814 million.
• Transaction to eliminate $1.7 billion in financings, including all RAL segment aircraft-related debt, substantially all Chorus corporate debt, and US$300 million in Series 1 Preferred Shares.²
• Pro forma Leverage Ratio³ as at the end of 2023 would decrease to 1.8x from 3.6x, with substantially all remaining debt relating to aircraft operated by Jazz Aviation under the Capacity Purchase Agreement (the “CPA“) with Air Canada and supported by fixed payments under the CPA.
• Pro forma Free Cash Flow³ after debt payments as at the end of 2023 is higher by 29%.
• Post-closing, Chorus to produce higher Free Cash Flow after debt repayments and have significant liquidity to both enable growth in aviation services and accelerate the return of capital to common shareholders.
• Brookfield Asset Management Ltd. (NYSE: BAM, TSX: BAM) through its Special Investments program, and Air Canada (TSX: AC), Chorus’ two largest common shareholders⁴, endorse the transaction.

HALIFAX, NS, July 30, 2024 /CNW/ – Chorus Aviation Inc. (“Chorus” or the “Company“) (TSX: CHR) announced today that it has entered into an agreement to sell all assets in its RAL segment, including Falko Regional Aircraft Limited (“Falko“) and Chorus’ equity interests in the aircraft investment funds managed by Falko and its affiliates to affiliates of investment funds managed by HPS Investment Partners, LLC (the “Transaction“). The aggregate consideration for the Transaction is approximately $1.9 billion, of which $814 million is in the form of cash (net of estimated transaction expenses) and $1.1 billion is in the form of aircraft debt to be assumed or prepaid by the buyers at closing and the value of the non-controlling interest.⁵

“We are pleased to announce this transaction, which is a catalyst for unlocking the embedded equity value in our RAL segment,” stated Colin Copp, President and Chief Executive Officer, Chorus. “This is a compelling transaction for shareholders with net proceeds representing a significant premium to the implied market value of the segment⁶ and at a price consistent with the trading multiples of our aircraft leasing peers.⁷“

“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. That will enable us to implement a sustainable return of capital program for our common shareholders and invest in future growth,” said Mr. Copp. “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.”

“This decision follows rigorous analysis and a sharp focus on accelerating value creation for shareholders. With the macro-economic environment, it became apparent that the transition to an asset light leasing model would take longer than originally anticipated,” said Paul Rivett, Chair, Board of Directors, Chorus. “Shareholders expected a strong, near-term catalyst for value creation. After evaluating various options, we determined that a sale of the RAL segment would give us the flexibility to pursue future growth and return capital to our shareholders faster.”

“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,” said Frank Yu, a Managing Partner in Brookfield’s Special Investments program.

Brookfield holds approximately 13.2% of Chorus’ outstanding common shares, and Air Canada holds approximately 8.1% of Chorus’ outstanding common shares. Both shareholders have signed voting support agreements with the buyers pursuant to which they have agreed to vote in favour of the approval of the Transaction and are expected to maintain representation on the Company’s board of directors following completion of the Transaction. Chorus and Air Canada have also agreed to amend and restate the investor rights agreement between them to, among other changes, reinstate Air Canada’s pro rata pre-emptive rights and reduce the ownership threshold applicable to Air Canada’s director nomination right. A copy of the amended and restated investor rights agreement will be filed under the Company’s profile on SEDAR+ at www.sedarplus.ca on or before the filing of the Company’s Material Change Report.

The Transaction is expected to close by the end of this year.

About Chorus Aviation

Chorus is a global aviation solutions provider and asset manager, focused on regional aviation. Our principal subsidiaries are: Falko Regional Aircraft, the leading pure play regional aircraft asset manager and lessor, managing investments on behalf of third-party fund investors; Jazz Aviation, the largest regional operator in Canada and provider of regional air services under the Air Canada Express brand; Voyageur Aviation, a leading provider of specialty charter, aircraft modifications, parts provisioning and in-service support services; and Cygnet Aviation Academy, an industry leading accredited training academy preparing pilots for direct entry into airlines. Together, Chorus’ subsidiaries provide services that encompass every stage of a regional aircraft’s lifecycle, including: aircraft acquisition and leasing; aircraft refurbishment, engineering, modification, repurposing and transition; contract flying; aircraft and component maintenance, disassembly, and parts provisioning; and pilot training.