/R E P E A T -- Chorus Aviation announces launch of aircraft leasing subsidiary and a $200 million private placement of convertible debt units to Fairfax Financial/

• New subsidiary will build a global, regional aircraft leasing platform
• Further advances Chorus' growth and diversification strategy
• Supported by $200 million Fairfax investment

HALIFAX, Dec. 19, 2016 /CNW/ - Chorus Aviation Inc. ('Chorus' or the 'Corporation') (TSX: CHR), announced today that it will establish a new regional aircraft leasing subsidiary, Chorus Aviation Capital, and has entered into an agreement pursuant to which Fairfax Financial Holdings Limited and certain of its subsidiaries (collectively, 'Fairfax') will invest CAD $200 million in Chorus through a private placement (the 'Fairfax Investment') of 200,000 convertible debt units (the 'Convertible Units').

"Today's announcement marks a significant milestone in support of our vision to deliver regional aviation to the world," said Joe Randell, President and Chief Executive Officer, Chorus. "We have been building our capabilities in aircraft leasing, and are encouraged both by our successes to date and the opportunities we see in this segment. The cost-effective and flexible source of capital provided by Fairfax will enable us to accelerate and strengthen our position as a leading player in this growing business segment. With this support from Fairfax, we will leverage our extensive relationships, knowledge and experience in aviation to create a regional aircraft leasing company capable of delivering a full suite of support services to customers worldwide."

"Chorus has been the leading Canadian regional carrier for decades, and has a long track record of profitability and strong operational performance," commented Prem Watsa, Chairman and Chief Executive Officer, Fairfax. "We believe the Chorus management team is pursuing an entrepreneurial strategy built around their regional aircraft expertise that capitalizes on strong market opportunities with attractive returns."

CHORUS' DIVERSIFICATION AND GROWTH STRATEGY

In recent years, Chorus has steadily grown its aircraft leasing revenues from aircraft deployed under the capacity purchase agreement between Jazz Aviation LP and Air Canada (the 'CPA'), reaching CAD $71.9 million in the first nine months ended September 30, 2016. On November 9, 2016, Chorus announced a transaction involving the lease of up to four Bombardier CRJ1000 aircraft to Air Nostrum, Lineas Aereas Del Mediterraneo, S.A., marking the first significant aircraft leasing transaction outside of the CPA. The establishment of an aircraft leasing subsidiary supported by Fairfax's $200 million investment in Chorus provides Chorus with a solid foundation from which to realize its ambition of building a globally-competitive, regional aircraft leasing business capable of providing a full suite of services to regional aircraft operators.

Chorus Aviation Capital will be led by Steven Ridolfi as President. Mr. Ridolfi is currently the Senior Vice President, Strategic Investments, Mergers and Acquisitions at Chorus. His long and distinguished career in aerospace, including his experience leading both Bombardier's Regional Aircraft and Business Aircraft units, makes him ideally suited to lead this new organization.

THE FAIRFAX INVESTMENT

The Fairfax Investment consists of 200,000 Convertible Units at a price of $1,000 CAD per Convertible Unit for gross proceeds of approximately CAD $200 million. Each Convertible Unit comprises a $1,000 secured debenture (the 'Debenture') and 121.2121 warrants (the 'Warrants').

The Debentures will bear interest at a rate of 6.00% per annum, are secured by certain Dash 8-100 and Dash 8-300 aircraft and real estate property owned by the Corporation's subsidiaries (the 'Collateral Security'), mature on December 31, 2024 (the 'Maturity Date') and will be redeemable by the Corporation at par at any time after December 31, 2021, except in the event of the satisfaction of certain conditions after a change of control or exercise of the Warrants. The Collateral Security will be released in the event that Fairfax sells or otherwise disposes of any of the Convertible Units.

Each Warrant will be exercisable by the holder thereof to acquire one Share¹ at an exercise price equal to $8.25 per Share payable in cash or by tendering the Debentures. Except in certain circumstances relating to a change of control of the Corporation, the Warrants may only be exercised after December 31, 2019 up to and including the earlier of the redemption of the Debentures by the Corporation and the business day immediately preceding the Maturity Date. The Warrants will include customary anti-dilution provisions.

Assuming the exercise of all of the Warrants, Fairfax, through its subsidiaries, would beneficially own 24,242,424 of the issued and outstanding Shares of Chorus, representing approximately 16.5% of all issued and outstanding Shares after the exercise of all of the Warrants (assuming no other issuances of Shares by Chorus or any adjustments to the Shares issuable upon the exercise of the Warrants pursuant to the applicable anti-dilution provisions).

In order to reduce interest costs, Chorus will have the ability (subject to meeting conditions precedent to each Convertible Unit issuance) to issue Convertible Units in up to four tranches between January 1, 2017 and March 31, 2017. All of the Warrants will be issued to Fairfax upon the issuance of the initial tranche, however, any Warrants relating to Debentures that are not ultimately issued will not be exercisable by the holder thereof.

Fairfax has agreed to hold the Convertible Units until at least December 31, 2019 after which time it may dispose of all or part of the Convertible Units.

Chorus will use the proceeds of the Fairfax Investment primarily to fund the growth of the Corporation's regional aircraft leasing business, as well as for working capital requirements and general corporate purposes.

The Fairfax Investment is conditional upon, among other things, receipt of conditional listing approval by the Toronto Stock Exchange of the Debentures as well as the Class B Voting Shares and Class A Variable Voting Shares of Chorus issuable as applicable upon the valid exercise of the Warrants.

RBC Capital Markets and UBS Securities Canada Inc. are acting as lead agents for Chorus.

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¹ "Share" refers, as the context requires, to a Class A Variable Voting Share of Chorus (which may be held by a non-Canadian) or to a Class B Voting Share of Chorus (which may be held by a Canadian). Please refer to Chorus' Annual Information Form (available at www.sedar.com) for a description of Chorus' capital structure.

Forward Looking Information

This news release may contain 'forward-looking information' as defined under applicable Canadian securities legislation. Forward-looking information typically contains words such as "anticipate", "believe", "could", "should", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar words and phrases, including references to assumptions. Such information may involve but is not limited to comments with respect to strategies, expectations, planned operations or future actions. Forward-looking information related to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and other uncertain events. Forward looking information, by its nature, is based on assumptions, including those described below, and is subject to important risks and uncertainties. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to differ materially from those expressed in the forward-looking statements. Factors that may cause results to differ materially from expectations in this news release include, without limitation, that the conditions precedent to the issuance of the Convertible Units are not fulfilled by Chorus. For a further discussion of risks, please refer to Section 18 – Risk Factors in the third quarter 2016 MD&A. Any statements containing forward-looking information in this news release represent Chorus' expectations as of December 19, 2016. However, Chorus disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

About Chorus
Headquartered in Halifax, Nova Scotia, Chorus was incorporated on September 27, 2010. Chorus' vision is to deliver regional aviation to the world. Chorus owns Jazz Aviation and Voyageur Aviation –  companies that have long histories of safe and solid operations that deliver excellent customer service in the areas of contract flying operations, engineering, fleet management, and maintenance, repair and overhaul. Chorus has been leasing its owned regional aircraft into Jazz's Air Canada Express operation since 2009. Chorus Class A Variable Voting Shares and Class B Voting Shares trade on the Toronto Stock Exchange under the trading symbol 'CHR'. www.chorusaviation.ca

SOURCE Chorus Aviation Inc.

Chorus Media Contacts: Manon Stuart, Halifax, Nova Scotia,[phone], [email protected]; Debra Williams, Toronto, Ontario, [phone], [email protected]; Analyst Contact: Nathalie Megann, Halifax, Nova Scotia, [phone], [email protected]

Related Links

www.chorusaviation.ca