This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ IN AMERICA - NOMINATED FOR 6 INDEPENDENT SPIRIT AWARDS IN AMERICA has audiences across the country moved by its emotional power. This Holiday season, share the experience of this extraordinary film with everyone you are thankful to have in your life. Ebert & Roeper give IN AMERICA "Two Thumbs Way Up!" Watch the trailer at: http://www.foxsearchlight.com/inamerica \----------------------------------------------------------/ Investor Fight to Control Air Canada Goes to Court December 5, 2003 By BERNARD SIMON TORONTO, Dec. 4 - One of Asia's wealthiest families has locked horns with a New York investment fund over Air Canada, in a dispute that is as much a clash of Canadian and American business styles as a disagreement over a deal. Air Canada, which has operated under the supervision of bankruptcy court since April, is expected to ask an Ontario Superior Court judge on Dec. 8 to approve an agreement that would make Trinity Time Investments the airline's largest shareholder. Trinity, controlled by Victor Li, son of the Hong Kong magnate Li Ka-shing, would acquire 31 percent of the airline's equity for 650 million Canadian dollars ($500 million). Air Canada struck the deal with Mr. Li on Nov. 8 after setting aside a competing bid from Cerberus Capital Management, a private equity fund that specializes in distressed companies. Undaunted, Cerberus came back two weeks later with offers to acquire either 12 percent or 27 percent of Air Canada. Only the broad outlines of the two new offers have been made public so far, but they appear to be much more favorable to the airlines' creditors than Trinity's. The Cerberus offers would give the creditors the right to buy up to 850 million Canadian dollars' worth of shares in a restructured Air Canada, almost twice the amount proposed by Mr. Li. Several major creditors are expected to join Cerberus in opposing the Trinity deal in court on Dec. 8. Comparing the styles of the two sides, Douglas Reid, an aviation specialist at Queen's University business school in Kingston, Ontario, said that "Li has essentially played within the rules," while Cerberus has taken a more aggressive and more typically American approach, which he summed up as, "If you don't win the first time, change the law and try a second time." Trinity said Cerberus's new offers were "improper interference." Calls to Cerberus and its Canadian lawyers were not returned. Air Canada carries about two-thirds of Canada's air passenger traffic and operates far more routes to American cities than any other foreign carrier. Its international route network is profitable, but it has had serious trouble making money at home, even after buying its biggest domestic competitor, Canadian Airlines International, in 2001. Overall traffic has been depressed by the slump in travel after the Sept. 11 terror attacks, the cooling of the North American economy and, most recently, by the outbreak of the SARS virus in Asia and Canada. And competition and cost pressure from newer rivals like WestJet of Calgary and Jetsgo of Montreal are growing. Though it posted a small operating profit in the third quarter, Air Canada had a net loss of 263 million Canadian dollars ($202 million) in the period, in contrast to a profit of 125 million Canadian dollars in the third quarter of 2002. The original bids from Trinity and Cerberus offered similar financial terms, but Air Canada said that the Trinity offer had the advantage of "lower closing risk." Unlike the Cerberus principals, Mr. Li is a Canadian citizen, immune from a rule that limits foreign ownership of an airline to a 25 percent stake. Air Canada said that it also stood to gain more new business opportunities from a link with the sprawling Li family interests than with an equity fund like Cerberus. It was not clear from the documents submitted to the bankruptcy court how Canada's 25 percent limitation on foreign ownership would affect Cerberus's higher alternative offer for 27 percent of Air Canada. The "intangibles of relationships and reputations" played a role in Air Canada's decision, said Karl Moore, a professor of management at McGill University in Montreal who follows the airline. Mr. Moore said that Cerberus made itself no friends earlier this year when it bought control of Teleglobe, an international phone carrier spun off from BCE, which like Air Canada is based in Montreal. Cerberus initially offered $155.3 million for Teleglobe, but later dropped its bid to $125 million. On the other hand, some Air Canada creditors and employees have expressed disquiet about a "golden handcuffs" provision in the Trinity offer that would grant 1 percent of the airline apiece to Robert Milton, the airline's chief executive, and to Calin Rovinescu, who has led the restructuring. The grants, to be spread over four years, are valued at about 21 million Canadian dollars for each executive. Cerberus initially proposed similar stock grants, but its revised offer instead includes cash bonuses of undisclosed value. While Mr. Reid at Queen's University generally praised the Air Canada restructuring process, he said that "suffering by senior management is conspicuous by its absence." Peter Foster, an official at the Air Canada Pilots Association, said that while the union had not taken a formal position on the proposed payouts to Mr. Milton and Mr. Rovinescu, "a lot of individuals have looked at it with annoyance." Even if the Trinity deal is approved in court next week, the door will remain open for Cerberus to press ahead with offers. The airline has the right to terminate the Trinity agreement if it decides to pursue an unsolicited alternative proposal. But John Evans, a lawyer at Osler Hoskin & Harcourt in Toronto, which represents Trinity, said court approval would allow Mr. Li to start negotiations with other parties involved in the restructuring. It would also entitle Trinity to a breakup fee of 19.5 million Canadian dollars, Mr. Evans said, in the event that Air Canada ends up in Cerberus's arms instead. http://www.nytimes.com/2003/12/05/business/worldbusiness/05canada.html?ex=1071633305&ei=1&en=2e8e908b19eb7ccc --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! Click here: http://www.nytimes.com/ads/nytcirc/index.html HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company