RE:RE:RE:ERT loves the financing!!Air Canada (AC-T) C$9.35 Refinancing Drives Interest Savings & Highlights Improving B/S Event Yesterday, Air Canada announced the terms of a series of debt refinancing transactions that will replace approximately $1.6 billion in senior secured notes and a term loan with a new $200-million senior secured note offering and a new US$800- million term loan. Impact: SLIGHTLY POSITIVE We are maintaining our ACTION LIST BUY recommendation on Air Canada and increasing our 12-month target price to $23.00, which now represents a potential return of 146%. We have increased our estimates to reflect the debt refinancing transactions, the associated interest expense savings, and other minor modelling updates related to non-fuel operating expenses, the net impact of which is higher EBITDAR and EPS forecasts. The interest expense savings associated with the refinancing transaction is approximately $60 million on an annualized basis and the reduction in long-term debt is approximately $355 million. We view this transaction positively due to the fact that it significantly reduces Air Canada's cost of debt capital, increases the flexibility that the company has for further debt reductions with future free cash flow, and highlights to investors the continuing improvement in the quality of Air Canada's balance sheet. We believe that significant balance-sheet deleveraging will begin in H2/17 and continue through the end of the decade, leading to an optimal level of financial risk for Air Canada and a level that could support an investment-grade credit rating. TD Investment Conclusion We believe that short-term upside in Air Canada will be driven by improving confidence in the prudence and value in the company's 2016 capacity decisions, the sustainability and growth potential of current cash flow and earnings, and the outlook for the Canadian economy. We maintain that Air Canada's financial performance over the past five years and expected results over the next five years support significantly higher valuation multiples than implied by the current share price and our 12-month target price. Over the long-term, as Air Canada continues to execute its strategy, we believe that the market will more appropriately discount the improving quality of the business through higher valuation multiples, which should lead to additional longterm share price upside beyond our 12-month target price.