ACACN TL B 1L USD

Air Canada Inc.

Credit, Industrial/Transportation


Presented:10/22/2020
Price:N/A
Cap:N/A
Current Price:$17.23
Cap:N/A

Presented

Date10/22/2020
PriceN/A
Market CapN/A
Ent ValueN/A
P/E RatioN/A
Book ValueN/A
Div Yield0%
Shares O/SN/A
Ave Daily VolN/A
Short IntN/A

Current

Price$17.23
Market CapN/A

Publicly traded companies mentioned herein: Air Canada (AC CN), American Airlines Group Inc (AAL), Delta Air Lines Inc (DAL), United Airlines Holdings Inc (UAL)

Highlights

The presenter is long Air Canada (AC CN)’s 4% coupon convertible bonds that are due July 2025. The bond is USD denominated and currently priced at ~114 but is convertible to the CAD denominated equity at a strike price of CAD$15.35. AC is Canada’s largest airline and generated ~CAD$3.8B of EBITDAR in 2019 but has experienced a material impact from COVID-19. His bullish outlook is predicated on the belief that Canada will begin to lift onerous restrictions on travel quarantines, AC’s strong financial position, and an attractive risk/reward setup. Applying a 6x multiple to the presenter’s CAD$2.5B 2022 EBITDAR estimate and assuming CAD$3B of cumulative cash burn through 2022, 40% vol, a 750bp credit spread, and a $0.76 CAD/USD conversion rate yields a twelve month price target of 154 (35% total return) and a CAD$26 stock price. 

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Idea Discussion

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