UPDATE 2-ACE Aviation says long-planned windup ready to go
(Adds comments, details)
CALGARY, Alberta, Dec 10 (Reuters) - ACE Aviation Holdings Inc (ACEa.TO), owner of a 75 percent stake in Air Canada (ACa.TO), will wind up its operations, saying on Wednesday it plans to distribute its Air Canada shares and other assets to shareholders.
The holding company, which has been evaluating the best way to wrap up operations for more than a year, said it will ask a court to approve the transaction and appoint a liquidator to distribute its cash and holdings.
Chief Executive Robert Milton had been evaluating the best way for ACE to part with the Air Canada stake as a way to end the holding company structure it set up in 2004 as part of the airline's bankruptcy protection proceedings.
Shareholders must approve the plan at a meeting expected to be held in February. The company is also looking to buy back its preferred shares and convertible notes before liquidating, offering C$20 per preferred share and 90 Canadian cents per dollar of face value on the notes.
Jacques Kavafian, an analyst at Research Capital, said he thinks debtholders may balk at the offer, potentially throwing a wrench into ACE's plans.
"I don't know why anyone would tender at a discount," he said. "At least (ACE) put forward a plan, but it may not be a good one since there is no incentive to tender."
ACE said it plans to buy back and cancel the convertible notes and preferred shares before seeking liquidation.
The company has C$322.7 million ($256.4 million) in notes outstanding and 12.5 million preferred shares worth C$307.6 million it also plans to repurchase.
ACE said its assets currently include C$811 million in cash, its 75 percent stake in Air Canada and a 27.8 percent interest in an aircraft maintenance and repair business.
The release made no mention of a plan to acquire the remaining shares of Air Canada, whose stock has plunged 91 percent since the airline's shares were floated in November 2006.
In the past year, ACE has sold off all its interests in frequent flier program Groupe Aeroplan (AER.TO) and Jazz Air LP (JAZ_u.TO), Air Canada's regional affiliate.
ACE's announcement followed a release earlier on Wednesday from one of its biggest shareholders, West Face Capital Inc, which asked the company to convene a special meeting of shareholders to remove all of ACE's current directors, set the size of the board and appoint new directors.
West Face said in a statement it "recently become concerned about the intentions of ACE management and the current board of directors as to the use of ACE's cash resources."
It said it wants an independent board to protect the interests of shareholders.
ACE's class A shares rose 23 Canadian cents to C$3.34 on Wednesday on the Toronto Stock Exchange while Air Canada's class A shares dropped 3 Canadian cents to C$1.81.
($1=$1.26 Canadian) (Reporting by Scott Haggett; editing by Rob Wilson)
