Cargojet Announces Closing of C$350 Million Bought Deal Equity Offering

posted on 1st February 2021 by Eddie Saunders
Cargojet Announces Closing of C$350 Million Bought Deal Equity Offering

Cargojet Inc. has announced that it has closed its previously announced offering of 1,642,000 common voting shares and/or variable voting shares of Cargojet at a price of C$213.25 per Share for aggregate gross proceeds to Cargojet of C$350,156,500. The Offering was made pursuant to a final short form prospectus dated January 25, 2021.

The Company intends to apply the net proceeds of the Offering to fund the following strategic priorities:

(a)Expand Domestic Capacity and Facilities. The COVID-19 pandemic has generally increased demand for Cargojet’s domestic air cargo services due to the dramatic increase in e-commerce activity. The Company intends to use a portion of the net proceeds of the Offering, along with cash on hand and drawings on its revolving credit facility, to fund growth capital expenditures and acquisition of five B767 freighter aircraft for re-delivery in 2021/2022 (with the last delivery in 2023) (approximately $200.0 million), as well as investments in a new hanger and additional land-based facility infrastructure in Canada. The infrastructure investments will support additional ecommerce volumes, driven by the ongoing pandemic, that are expected to establish a new higher baseline going forward.
(b)Pursue U.S. and International Growth Strategy. The COVID-19 pandemic has significantly increased demand for Cargojet’s international air cargo services. Air cargo capacity has been severely constrained due to the reduction of passenger aircraft operating on international routes and it is uncertain when such capacity will return to pre-pandemic levels. Furthermore, U.S. and international air cargo growth opportunities have emerged as a result of rapidly evolving global supply chains and a lack of air cargo capacity in key markets. The Company intends to use a portion of the net proceeds of the Offering, along with cash on hand and drawings on its revolving credit facility, to capitalize on potential strategic investments in the U.S. and the acquisition of two long-range B-777 freighter aircraft for international routes for re-delivery in late 2023 and the first half of 2024. The Company estimates the cost of each B-777 freighter aircraft to be approximately $75.0 million.
(c)Repay Indebtedness. The Company intends to use a portion of the net proceeds of the Offering to discharge aircraft financing leases, including associated balloon payments, for six aircraft maturing in the next twelve months (approximately $89.3 million) and retire the outstanding balance under its credit facility ($98.9 million as of the date hereof, including letters of credit), which is primarily used to finance the working capital requirements and capital expenditures of the Company.

The Shares were offered by Scotiabank, CIBC Capital Markets, RBC Capital Markets, J.P. Morgan Securities Canada Inc., Morgan Stanley Canada Limited and BMO Capital Markets acting as co-leads and joint bookrunners, on behalf of a syndicate of underwriters (collectively, the “Underwriters”).