Chorus Aviation completes acquisition of Falko Regional Aircraft (2022-05-03)

Creates world's largest aircraft lessor focused solely on serving the regional aviation segment

HALIFAX, NS, May 3, 2022/CNW/ - Chorus Aviation Inc. ('Chorus') (TSX: CHR) announces that it has completed its acquisition of Falko Regional Aircraft Limited ('Falko'), as previously announced on February 27, 2022. This acquisition transforms Chorus into a premier full-service provider in regional aviation with unique capabilities to maximize value at every stage of an aircraft's lifecycle. The completion of this transaction establishes Chorus as the world's largest aircraft lessor focused solely on investing in the regional aircraft leasing space, and results in a portfolio of 348 regional aircraft with an aggregate value of approximately US$4.5 billionwhich are owned, managed, and/or operated by Chorus subsidiaries. As contemplated by the acquisition agreement, Chorus expects to acquire the beneficial interests in five aircraft trusts on a deferred basis prior to the end of the second quarter of 2022 (subject to the satisfaction or waiver of specified conditions applicable to those transactions) bringing the total to 353 aircraft.

"I'm extremely pleased and very optimistic about our future growth opportunities," said Joe Randell, President and Chief Executive Officer, Chorus. "This transformative acquisition establishes Chorus as the world's largest aircraft lessor focused on the regional aviation segment and a leading worldwide provider in all aspects of regional aviation. Further, the transaction is expected to be accretive to earnings and earnings per share in 2022¹. With the addition of Falko's asset management platform, we will shift to growing our leasing business through an asset light model, significantly increasing cash flow generation, improving return on invested capital, and facilitating the pursuit of larger deals with more efficient access to equity capital. Growth through accessing third party capital reduces balance sheet exposure, lowering debt and residual value asset risk, while also enhancing stability and diversity of earnings, through asset management fees. The combined leasing platforms also present a broadened market opportunity covering the full age spectrum of regional aircraft from new deliveries to mid and end-of-life aircraft. Chorus' technical skills and capabilities, including aircraft repurposing, end of life disassembly, and parts provisioning and sales, provide multiple opportunities to maximize returns on aircraft assets."

Concurrent with the closing of the Falko acquisition, Chorus closed the private placement with an affiliate of Brookfield Special Investments Fund L.P. ('Brookfield') as previously announced on February 27, 2022. As a result of this transaction, Brookfieldbeneficially owns 25,400,000 (Class B Voting Shares) of Chorus (representing approximately 12.5% of Chorus' issued and outstanding common shares² of Chorus), 300,000 Series 1 Preferred Shares of Chorus and 18,642,772 common share purchase warrants. Chorus and Brookfieldalso entered into an Investor Rights Agreement in connection with Brookfield'sinvestment. This new relationship with Brookfieldgives Chorus access to their extensive experience in asset management, fundraising and capital markets.

"I'm deeply grateful to our team for delivering significant value to our employees, customers, and shareholders. The Chorus Aviation Capital team's dedication to growth since its inception in 2017 has helped make this significant milestone a reality; they are a terrific complement to the Falko team, and we are very pleased to welcome the Falko employees to the Chorus group. Our immediate priority is to seamlessly integrate operations and ensure the successful execution of the opportunities this transaction brings. We believe the timing of this endeavour is opportune as global air travel continues to resume and demand for regional aircraft leasing increases," concluded Mr. Randell.

In accordance with the terms of the Investor Rights Agreement between Chorus and Brookfield, Mr. David Levenson, Managing Partner and Global Head of Brookfield Special Investments, and Frank Yu, Managing Director, Brookfield Special Investments have been appointed to the Chorus board of directors. (Bios for Messrs. Levenson and Yu are available on Chorus' website at www.chorusaviation.com). In addition, Mr. Paul Rivetthas been appointed Chair of the Chorus Board of Directors. Paul joined Chorus' board in 2021 and is the co-founder and Chairman of NordStar Capital Inc., a company he co-founded in 2020. Prior to co-founding NordStar, he served as the President of Fairfax Financial Holdings Limited, a global insurance holdings and value investing company, where he worked for nearly two decades. Chorus' former Chair of the Board, Mr. Richard Falconerand director, Mr. Sydney John Isaacs, elected to retire from the Chorus Board effective today, thereby enabling the immediate appointment of the Brookfieldnominees. The Chorus team is very indebted for their dedication and commitment, and sincerely thank them for their service.

Transaction Highlights

Increased size and scale:

• Portfolio of 348 owned, operated, and/or managed aircraft with 32 airlines in 23 countries.
• Market opportunities are broadened and enhanced by strengthened market competitiveness and ability to execute larger leasing transactions.
• Full suite of service offerings and full age spectrum of aircraft provides the ability to offer value-added solutions to customers.
• Best-in-class trading platform with deep market insight and relationships.

Financially accretive in the first year:

• Earnings and EPS in 2022 creating an attractive financial profile.
• Asset management model increases cash flow generation, improves return on invested capital, lowers the cost of capital and balance sheet risk.
• Diversifies revenue streams and provides access to larger pools of capital to accelerate growth.
• Brookfield'sinvestment immediately reduces net leverage³.
• Multiple aircraft exit strategies provide enhanced shareholder returns.
• Well-capitalized to pursue further growth opportunities across multiple acquisition channels.

Exceptional expertise in asset management, capital raising and markets:

• Combines best-in-class management teams in regional aviation with over 200 years experience.
• Establishes Brookfield as a strategic investor with a 12.5% common share stake and adds Brookfield'sexpertise to Chorus' Board of Directors.

Additional information including key metric projections for the balance of fiscal 2022 will be provided concurrent with Chorus' first quarter 2022 financial disclosure on May 5, 2022.

Endnotes

1. Based on assumptions including currently contracted and planned lease revenue, and asset management revenue, depreciation expense, interest costs on the debt assumed with the acquisition, estimated tax rates and USD/CAD exchange rate of 1.27. Preferred share dividends are deducted for the purposes of calculating EPS.
2. Refers to Chorus' Class A Variable Voting Shares and Class B Voting Shares.
3. Leverage is defined as pro forma net debt to equity.

Advisors
Deutsche Bank Securities Inc. was the exclusive financial advisor to Chorus. Dentons UK and Middle East LLP was the legal advisor to Chorus in connection with the acquisition transaction, and Osler, Hoskin & Harcourt LLP was the legal advisor to Chorus in connection with the private placement.

About Chorus Aviation Inc.
Chorus is a global provider of integrated regional aviation solutions. Chorus' vision is to deliver regional aviation to the world. Headquartered in Halifax, Nova Scotia, Chorus is comprised of Chorus Aviation Capital a leading lessor of regional aircraft, and Jazz Aviation and Voyageur Aviation - companies that have long histories of safe operations with excellent customer service. Chorus provides a full suite of regional aviation support services that encompasses every stage of an aircraft's lifecycle, including aircraft acquisitions and leasing; aircraft refurbishment, engineering, modification, repurposing and preparation; contract flying; aircraft and component maintenance, disassembly, and parts provisioning.

Chorus Class A Variable Voting Shares and Class B Voting Shares trade on the Toronto Stock Exchange under the trading symbol 'CHR'. Chorus 6.00% Senior Debentures, 5.75% Senior Unsecured Debentures due December 31, 2024, 6.00% Convertible Senior Unsecured Debentures due June 30, 2026, and 5.75% Senior Unsecured Debentures due June 30, 2027trade on the Toronto Stock Exchange under the trading symbols 'CHR.DB', 'CHR.DB.A', 'CHR.DB.B', and 'CHR.DB.C', respectively.

www.chorusaviation.com

About Falko Regional Aircraft Limited
Falko is an established asset management company actively engaged in all aspects of commercial aircraft leasing, financing, and management with particular focus on the regional aircraft market. The team of specialists is focused on managing a portfolio of modern regional jet and turboprop aircraft on lease to leading airlines worldwide, in combination with a growing engine leasing and trading business. Falko is globally positioned to offer comprehensive asset management solutions to the regional aviation industry, with offices and representation in Europe, Asia, South Americaand Australia, from which extensive experience and expertise can be deployed across all regions of the world.

Since 2011, Falko, through its managed funds and affiliates, has acquired over 320 regional jet and turboprop aircraft worth in excess of US $3 billion. www.falko.com

About Brookfield Asset Management
Brookfield is a leading global alternative asset manager with approximately $700 billion of assets under management across real estate, infrastructure, renewable power and transition, private equity, and credit. Brookfield owns and operates long-life assets and businesses, many of which form the backbone of the global economy. Utilizing its global reach, access to large-scale capital and operational expertise, Brookfield offers a range of alternative investment products to investors around the world-including public and private pension plans, endowments and foundations, sovereign wealth funds, financial institutions, insurance companies and private wealth investors.

Brookfield is listed on the New York and Toronto stock exchanges under the symbol BAM and BAM.A respectively.

Forward-Looking Information
This news release includes forward-looking information and statements. Forward-looking information and statements are identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "potential", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions. All information and statements other than statements of historical fact are forward-looking and, by their nature, are based on various underlying assumptions and expectations that are subject to known and unknown risks, uncertainties and other factors that may cause actual future results, performance or achievements to differ materially from those indicated in forward-looking information or statements. As a result, there can be no assurance that the forward-looking information and statements included in this news release will prove to be accurate or correct.

Actual results may differ materially from anticipated results indicated in forward-looking information and statements for a number of reasons, including: a failure to complete the acquisition of the beneficial interests in the five aircraft trusts mentioned in this news release on the terms currently contemplated or at all; Chorus' ability to successfully integrate Falko's operations and employees and realize the anticipated benefits of the acquisition transaction; the potential impact of the completion of the acquisition transaction on relationships, including with employees, suppliers, customers, investors and other providers of capital; a prolonged duration of the COVID-19 pandemic (including as a result of the emergence of new COVID-19 variants) and/or further restrictive measures to minimize its public health impacts; the impact of the COVID-19 pandemic on the financial strength of Chorus' and Falko's contractual counterparties; changes in the aviation industry and general economic conditions; Chorus' ability to pay its indebtedness and otherwise remain in compliance with its debt covenants; the risk of cross defaults under debt agreements and other significant contracts; the risk of asset impairments and provisions for expected credit losses; and the risk factors in Chorus' most recent Annual Information Form and in its public disclosure record available under its profile on www.sedar.com. Forward-looking information and statements contained in this news release represent Chorus' expectations as of the date of this news release (or as of the date they are otherwise stated to be made) and are subject to change after such date. Chorus disclaims any intention or obligation to update or revise such information or statements to reflect new information, subsequent events or otherwise, except as required by applicable securities laws. Readers are cautioned that the foregoing factors and risks are not exhaustive.

SOURCE Chorus Aviation Inc.

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