Quebec billionaire

Pierre Karl Peladeau

says he’s not giving up his long pursuit of

Transat AT Inc.

, arguing the travel company’s latest balance-sheet manoeuvres still leave it with too much debt.

“It’s not over until it’s over,” Peladeau said in an interview with Bloomberg News. “The company will require another restructuring. They cannot live with that, or if they live with that, they will be impaired in their capacity to develop the business.”

Peladeau’s interest in owning Transat goes back many years. He mulled a bid when the company was in play in 2019, but the board eventually agreed to an offer of $18 a share from

Air Canada

. The COVID pandemic struck before the transaction closed, and it was scuttled altogether in 2021.

Peladeau has made a number of attempts to buy the company since. Last month he offered $2.64 a share, which was rejected.

Transat, a Montreal-based company that owns Air Transat, has grappled with an overwhelming debt incurred during the pandemic, when it had to get emergency funding from the Canadian government. Last month, the government agreed to reduce that debt by around $440 million. The remaining debt was restructured into a credit facility, a 10-year debenture and convertible preferred shares, the latter of which would give Ottawa a 19.9 per cent voting stake if converted to common shares.

The deal didn’t sit well with Peladeau, who owns slightly more than nine per cent of Transat. His family office, Financiere Outrement, advised by Canaccord Genuity Group Inc., made its $2.64 per share offer, but conditional on reaching an agreement with the Canadian government on debt terms. Transat rejected it.

“I was taking the risk to negotiate,” said Peladeau, whose wealth mostly comes from his controlling stake in telecom and media company Quebecor Inc.

He tried to stop the deal with the Canadian government in court, arguing that Transat should have consulted shareholders. A judge sided with the company, which had argued the severity of the situation allowed it to bypass shareholders. As of the end of April, prior to the debt restructuring, Transat had a net $1.7 billion in debt and lease liabilities.

Transat shares have soared by more than 70 per cent to $2.82 since the debt restructuring was announced in June, raising the market capitalization to $117 million.

Peladeau said the stock price should have risen by much more than that. “The market is saying it doesn’t work,” he said.

Desjardins analyst Benoit Poirier wrote in a report last month that despite the debt swap, “leverage is still elevated relative to industry norms.” He forecasts the company to have a ratio of 6.7 times net debt to adjusted earnings before interest, taxes, depreciation and amortization for the fiscal year that ends Oct. 31. Air Canada has a ratio of lower than two times.

“I need to reconsider the situation,” Peladeau said when asked about what will be his next move.

Peladeau believes Transat’s restructuring raises a fundamental issue. “Should the Canadian government be the largest shareholder of an airline, which is regulated by the government? So if I’m an American and I look at this, I say: What’s wrong here?”

Transat said in a statement that the refinancing was “the best outcome in the interest of all stakeholders” and “paves the way for Transat to further implement its long-term sustainable strategic and optimization plan.” The company declined to comment on Peladeau’s considerations.

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The court proceedings revealed that Transat had set up a special committee in September to look for available options to restructure the debt. In January, a solicitation process was launched and 49 potential investors were approached.

Only two bidders, including Peladeau’s family office, made it to the final phase, and they offered no equity value. The Canadian government ended up agreeing to the refinancing.

The Caisse de depot et placement du Quebec, one of the largest shareholders, said it was in favour of the debt swap. “The restructuring of Transat’s debt was an essential step and will be beneficial to the company’s turnaround. We hope that this Quebec-based company will be able to return to growth, after the more difficult years of the pandemic,” the firm said in a statement emailed by a spokesperson.

Bloomberg.com