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Mulroney part of Air Canada bid
Mulroney part of Air Canada bid
Former prime minister stands to be made airline's chairman if plan succeeds Paul Vieira, with files from Barry Critchley National Post Friday, November 28, 2003 Brian Mulroney, Canada's former prime minister, is helping to orchestrate an attempt by a Wall Street hedge fund to reopen the bidding process for Air Canada -- and stands to be made chairman of the airline if he succeeds, sources have told the National Post. Mr. Mulroney is senior legal advisor to Cerberus Capital Management, which lost out earlier this month to Victor Li, the Hong Kong businessman, to become the insolvent airline's new equity sponsor. Sources, who did not want to be named for this story, say the former Tory leader has played a role in helping Cerberus launch a revised, but unsolicited and controversial, offer for the airline, and is lobbying Air Canada executives to get them to reconsider. A copy of Cerberus's initial bid for the airline, obtained by the Post, indicated the fund had slated Mr. Mulroney to be one of 12 directors on a revamped board. Sources say Mr. Mulroney would, in fact, be named chairman of the airline he privatized as prime minister in 1989 -- which saw Ottawa collect roughly $492-million for its shares. "If Cerberus wins, Mulroney is the new chairman of Air Canada. Cerberus has already said that," a source close to the restructuring said. "Mulroney has made personal calls to Air Canada board members and Air Canada management on this issue. He's up to his ears on this," said another source, who has ties to the Montreal business community. Mr. Mulroney was not at his Montreal law office yesterday and did not return a phone call. Cerberus, named after the monstrous three-headed canine that guarded the entrance to Hades in Greek mythology, retained Mr. Mulroney's law firm Ogilvy Renault to act as its legal advisor during the fund's attempt to become Air Canada's equity sponsor. The airline began a search for an investor last July in order to find a party willing to inject at least $700-million to help the insolvent airline exit bankruptcy protection, which it filed for last April 1. Air Canada narrowed its list of equity partner finalists to Cerberus and Mr. Li, who holds Canadian citizenship and is the son of Li Ka-shing -- the Hong Kong industrialist and one of the world's wealthiest individuals. On Nov. 8, the airline's board of directors, in what sources say was a unanimous vote, opted for Mr. Li's Trinity Time Investments, which agreed to put up $650-million for a 31% stake. The board voted in unison even though Mr. Mulroney, sources say, tried to lobby directors with whom he has close ties. "He leaned on them -- but despite that leaning, the board still saw the math and said, 'No, Li is a better candidate,' " the restructuring source said. Among the board members Mr. Mulroney targeted, sources indicate, a Raymond Cyr, former chairman and chief executive of BCE Inc., Bell Canada's holding company; David Angus, a Montreal lawyer and former head of the main Progressive Conservative fundraising organization; and Fernand Lalonde, a one-time political strategist for Robert Bourassa, the late Quebec Liberal premier. Air Canada's court-appointed monitor, Ernst & Young, said in a report filed this week neither Mr. Li nor Cerberus "expressed any concerns" the investor search was proceeding in a manner that was "unfair to them or which deprived them of a fair opportunity to make their best proposal." But in court documents filed by Air Canada this week, Cerberus informed the Montreal company it failed to put forth its best offer and wanted to try again. It submitted two revised offers that appear to be richer than Mr. Li's. More specifically, some of Air Canada's creditors, owed between $8-billion and $10-billion, have voiced support for the revised bid because it gives them a better chance to recoup more of their money. Air Canada has refused to consider the Cerberus offer, saying that doing so would violate the agreement with Mr. Li. It has applied for court approval of the Trinity agreement, which is required by Dec. 20 as a condition of the deal. The Cerberus offer, while welcomed by some Air Canada debtholders, has earned scorn from some senior financiers on Bay Street, saying it demonstrates bad faith on the hedge fund's part after it participated in what was described by the court-appointed monitor as a fair, transparent process. "If they reopen the bidding process, the precedent that would be set for any auction process would be astounding," said a Bay Street executive, who has no ties in the Air Canada restructuring. "Why would anyone put their best foot forward in an auction? They would just throw in a bid after the fact." Cerberus, whose representatives did not return phone calls, manages close to US$10-billion in assets and is known as a turnaround artist that buys distressed assets, oversees their restructuring and sells them years later at a healthy profit. But it has done so by rubbing many people the wrong way. A senior banking executive said: "Look at what Cerberus does at every process they get into. They hold it hostage so they can squeeze out some type of payment for themselves -- with no commitment to building any value at all." The executive, who requested anonymity, said Cerberus's unsolicited bid is nothing more than "sour grapes" on the fund's part. |
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