Good morning, ladies and gentlemen, and welcome to the Chorus Regional Aircraft Leasing Transaction Analyst call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, July 30, 2024. I would now like to turn the conference over to Tyrone Cotie, Vice President, Treasury, and Investor Relations. Please go ahead.
Thank you, Jolene. Hello, and thank you for joining us today regarding the announcement of the agreement to sell our regional aircraft leasing segment. With me today from Chorus are Colin Copp, President and Chief Executive Officer, and Gary Osborne, Chief Financial Officer. During today's call, we'll provide you with some context for this transaction, review the planned use of proceeds and go forward capital structure, as well as some key deal and post-deal metrics, before finishing with an overview of the future plans, followed by questions from the analyst community. Please note that unless otherwise indicated, all references to dollars are in Canadian dollars. As there will be some forward-looking discussion during the call, I ask that you refer to the caution regarding forward-looking statements and information found in our news release and the related presentation.
In addition, some of the following discussion involves non-GAAP financial measures, including references to Leverage Ratio, Net Debt to Adjusted EBITDA, Adjusted Earnings Per Share, Adjusted Return on Equity, Adjusted Net Income, Adjusted EBITDA, Free Cash Flow, free cash flow after debt repayment, Price-to-Earnings Ratio and Price-to-Book Ratio. Please refer to our news release and investor presentation for a discussion relating to the use of such non-GAAP measures. I'll now turn the call over to Colin Copp.
Good morning, everyone, and thank you for joining us. I'm very pleased to announce today that following several months of hard work, Chorus Aviation has entered into an agreement to sell our Falko Leasing business and all assets forming our regional aviation leasing segment to HPS Investment Partners. This is truly a milestone transaction for Chorus. The transaction includes the sale of Falko and Chorus's equity interest in the aircraft investment funds managed by Falko for an aggregate price of approximately CAD 1.9 billion. CAD 814 million of that is in cash, and CAD 1.1 billion consists of aircraft debt assumed by the buyer and non-controlling interests. This transaction enables us to significantly reduce our corporate debt and free up cash flow to capitalize on growth opportunities and returns for shareholders.
The transaction is subject to approval by Chorus's common shareholders, regulatory approvals and other customary conditions to closing, and we expect it to close before the end of the year. Now, before we jump into the financial details of the transaction, let's first talk about the background and strategic rationale behind the decision to sell the Falko platform or the Falko platform with our on-balance sheet assets. The decision to sell our leasing business comes after significant analysis and evaluation by both the management team and board. We see this as a key enabler to repositioning the company for future growth. Since acquiring Falko, and as I discussed at our Investor Day in early 2023, the plan all along has been to deleverage our balance sheet by selling down the on-balance sheet assets and transitioning Falko to an asset-light business.
As we progressed through 2023, it became clear that the level of returns from the Falko acquisition were not materializing at the pace we had expected due to the challenging macroeconomic environment. These conditions slowed our transition to an asset-light leasing model in two respects. One, it impacted aircraft trading economics due to tighter debt market, and two, it impacted fundraising for alternative asset managers such as Falko. As we considered our options throughout the process, we've been determined to ensure that we obtain fair value on any aircraft sales. In the fall of 2023, we were marketing a significant portfolio of aircraft, over 50 aircraft, to support the transition to asset-light, and it was at that time that we started to receive unsolicited offers for the entire RAL segment, including Falko.
The management team and the board determined that the sale of the full leasing segment was an option that we should explore for several reasons, including that we were not receiving credit for the underlying value of the business, which was demonstrated with our share price trading well below book value, and that the pace of execution on the asset-light strategy was unsatisfactory. In consultation with external advisors, we assessed multiple options, including retaining and gradually divesting groups of assets within the leasing business. Our analysis revealed that the complete divestiture presented the best opportunity to unlock and monetize the embedded equity value most efficiently and to serve as a near-term catalyst to position the company for growth. It was clear by including the Falko platform with the on-balance sheet aircraft portfolio, that the asset sale process would take some additional time.
However, we would be able to optimize the value of our assets and obtain much better pricing. We selected Goldman Sachs as our lead, and we ran a robust competitive process with multiple bidders, ultimately generating a transaction price, which offers a very strong value for the business, and net proceeds represent a significant premium to our current share price. As stated in the news release, Goldman Sachs has provided a fairness opinion. The buyer, HPS, is a leading global investment firm with over CAD 100 billion in assets under management in both public and private credit markets. We see this transaction as a catalyst to accelerate the pace of value creation for our shareholders by unlocking the significant embedded value in our assets.
We recognize that the decision to sell Falko with our assets is the best decision to accelerate value creation for Chorus and to address the discount that has persisted for some time now in our share price. This transaction will significantly deleverage our capital structure, generate more predictable cash flow, and provide us with greater flexibility to pursue opportunities for growth and return capital to common shareholders. Let me touch on the compelling value of the transaction. We believe an appropriate valuation for RAS, RAS segment alone, is a 7x multiple of EV to EBITDA, which is approximately CAD 900 million. This is consistent with where our peers trade today. Based on our share price today, our market cap is around CAD 540 million, which demonstrates that we're receiving a negative valuation for just the RAL business alone.
The sale value achieved at CAD 1.9 billion delivers a price to book of 0.84 times, which aligns closely with our publicly traded peers in aircraft leasing space. We see this transaction resulting in substantial shareholder value creation relative to the valuation we're receiving today. It is a catalyst to accelerate the pace of value creation for our shareholders by unlocking the significant embedded value in our assets. Now, I'd like to take a moment to touch on a few key highlights of the transaction. Gross proceeds from the sale are expected to eliminate CAD 1.7 billion in financings on a pro forma basis, including all RAL-related debt, substantially all Chorus corporate debt, and the Series 1 Preferred Shares. We will eliminate approximately CAD 58 million in annual servicing costs, including the preferred share dividend payments.
The 2023 pro forma leverage improves from 3.6x-1.8x net debt to Adjusted EBITDA, with substantially all remaining debt related to the CPA aircraft, which are supported by lease payments under the CPA. This will improve cash flow metrics and also create substantial go-forward flexibility with over CAD 250 million in liquidity pro forma. Finally, I'd like to note that our two largest common shareholders, Brookfield and Air Canada, support and endorse the transaction, seeing the significant value in this deal for our shareholders. I'm going to now turn the call over to Gary to speak to you about the specifics of key areas that best underscore the timelines and value of this transaction.
Thanks, Colin. In addition to unlocking significant value in RAL, this transaction also allows us to dramatically delever and simplify Chorus's balance sheet and capital structure, and create an easier-to-understand business model, while simultaneously positioning the company to capitalize on future growth opportunities and allow for future return of capital to shareholders. Now, I'd like to provide some context on how this transaction will help strengthen and simplify the balance sheet. The figures shown on slide 6 are pro forma, December 31, 2023, and are for illustrative purposes to show the impact of this transaction. As of year-end 2023, we were carrying total financings of approximately CAD 2.1 billion, comprised of CAD 1.8 billion of debt and CAD 300 million of preferred shares.
This transaction will eliminate CAD 1.7 billion of those financings, with highlights as follows: RAL aircraft debt being paid out and/or assumed by the buyer out of the gross proceeds of sale. The amount of this debt was CAD 987 million as of December 31, 2023. Another important part of the transaction will be the redemption and elimination of the preferred shares, which have a face value of CAD 300 million. Chorus is also making an offer to redeem all outstanding public debentures. These are our Series A, convertible Series B, and Series C debentures, which have a face value of CAD 237 million, net of transaction costs, and paying our operating credit facility valued at CAD 60 million at the end of June 30, 2024.
So as you can see, the proceeds will be allocated to considerably reduce these financings and are expected to eliminate significant debt servicing costs and dividend payments totaling CAD 58 million annually. This also leads to the elimination of annual debt and interest payments and preferred share dividend payments of CAD 280 million on a pro forma 2023 basis. The debt that remains post-closing substantially consists of debt relating to aircraft operated by Jazz Aviation under the CPA with Air Canada, which is fully supported by the contract out to 2035. The changes I just discussed to the capital structure will result in a substantially strengthened and simplified balance sheet. Our pro forma leverage as of December 31, 2023, will be reduced by almost 2 turns to 1.8 times net debt to Adjusted EBITDA.
This ratio is well below the target range for the company and that of the, our peer group, positioning Chorus extremely well to seize on future growth opportunities. Changes in capital structure I just covered also drive improved profitability with our pro forma 2023 EPS increasing by 17% to CAD 0.35 per share. These increases are predominantly driven by reduced debt servicing costs and eliminating the preferred share dividends, which more than offset earnings foregone from the sale. When we step back and look at this transaction, we see a significantly improved and simplified balance sheet, improved earnings, and improved free cash flows after debt payments. This will provide us the ability to grow the business and give consideration to future return of capital to shareholders.
We have also worked with our lenders, led by The Bank of Nova Scotia, to put in place significant flexibility in our capital structure with this transaction. We have amended our CAD 50 million bilateral facility, secured by the unencumbered aircraft leased under the CPA, to be available for future growth opportunities. In addition, we are maintaining our CAD 150 million secured operating revolver. This provides us CAD 200 million in financing to support operations and the growth of the company. I would also like to point out that the guidance we published in Q1 2024 for RAS remains, in fact, in effect, and the Chorus consolidated and RAL guidance are removed, given the expected close of this transaction later this year. I will now turn it back to Colin for his closing remarks.
Thank you, Gary. Let me touch on the future and where we see Chorus growing and thriving moving forward. As you can see on slide eight, following the transaction, our mix of businesses will produce predictable cash flows that build over time, enabling us to leverage our capabilities and strengths to grow. I'd like to point out that since the launch of our leasing business in 2017, we've had to allocate the majority of our time and financial resources to investing and growing this specific sector of our business. With this transaction, we will reset and shift the intensity of our focus to other sectors of the operation, where there's considerable growth opportunities available to us. We have a long history going back years with extensive experience and capabilities in the aviation industry.
Jazz today is Canada's third-largest airline, with over 4,500 employees, operating approximately 100 aircraft to 72 destinations throughout North America in support of our key customer, Air Canada. Jazz has very much been the backbone of our business, producing consistent financial and strong operational results. It's a business that has a significant standing in the Canadian aviation sector and a very bright future. As I reflect back to mid-2019, when I became president of Chorus' Regional Aviation Services Group and assumed the overall responsibility for the operations of Voyageur. At that time, Voyageur's business was predominantly driven by its overseas flying operations and specialty MRO work. Over the last few years, the Voyageur team has doubled their earnings and transitioned the business to higher margin areas.
They've done so by leveraging core capabilities, relationships, expertise to expand in cargo operations for Purolator, built a regional aircraft used parts business that's one of the largest in the world, and entered the rapidly growing aerospace and defense market by securing multiyear government contracts. All of which was principally accomplished by Voyageur through self-funding of the growth. Within defense, we see great potential for Voyageur to continue growing in the intelligence, surveillance, and reconnaissance sector, which is a global market size of approximately CAD 14 billion, with half of that driven within the North American market. They are well-positioned in this area today, given their many years of experience and capabilities in specialty aircraft modifications and operations, as well as their logistics and supply chain capabilities and relationships.
Voyageur will continue to provide a meaningful platform to grow our special mission operations through both organic growth and bolt-on acquisitions to expand our capabilities and market share. More recently, we moved into the flight training role, again, leveraging our deep industry knowledge and relationships with partners like CAE to establish a leading-edge pilot training school. There are strong demands for aviation skills training within the North American market, and airline flight training market is valued at approximately CAD 700 million in 2024. These are only a couple of examples. There are several other areas that we can grow in, which align well with our experience and capabilities in the aviation services side, and I believe we've only scratched the surface.... I'm confident in our team's ability to expand and grow the operations side, both organically and through acquisitions.
I believe that it will be made possible with added focus and the resources post this transaction, and by simplification of our business and a more flexible balance sheet. In closing, I'd like to reiterate that this is truly a milestone transaction, enabling us to sell our leasing business at a substantial premium to the implied market value and at a market competitive price. It significantly deleverages our balance sheet, making us stronger and giving us a greater financial flexibility going forward. It will enable us to look at implementing an ongoing return of capital program based on sustainable free cash flow, and it will provide us the flexibility to both grow and invest in the business. I want to conclude by thanking our board of directors for their oversight and their commitment on unlocking value for our shareholders.
We are also grateful for the support of our partners, Brookfield and Air Canada, throughout this process and for their endorsement of this transaction. Both companies will continue to maintain representation on the Chorus board of directors following the completion of the transaction. Many thanks go to all employees from all of our companies, but particularly to those at Falko and Chorus, who worked tirelessly to bring this transaction to this point. The Falko team has been focused and exemplary throughout this process, and I'm grateful for them and for their hard work and professionalism. Last but not least, I want to thank our shareholders for their support and reiterate our commitment to delivering on value creation. Thank you. We're now happy to open it up to questions.
Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Kevin Chiang with CIBC. Your line is now open.
Hi, good morning, and thanks for taking my questions here. Maybe if I could ask, if I could take a step back and if I go back to, like, 2016, when you initially embarked on this diversification strategy, and you had raised some capital to move into the leasing world. You know, with this sale to HPS, you effectively come full circle to what I guess the assets you would have had back in 2015. If memory serves me correct, you know, one of the reasons you pursued that diversification effort into leasing was a feeling that the public markets weren't appropriately valuing you as an aviation service company, that it wanted some diversification in your revenue stream.
So, I guess what's changed today when you think of RAS as a standalone business within Chorus? And then, I'm not sure how you'd answer this, but, you know, thoughts of would it make sense to run a strategic review for RAS, given I guess your thoughts back in 2014 and 2015 about this being your sole growth factor, back, you know, back 6, 7, 8 years ago?
Hi, Kevin, it's Colin. Thanks for the question. Absolutely. Yeah, look, you know, it, when we look at where we are today, it's a milestone transaction for the company. You know, it really enables us to significantly improve our balance sheet and accelerate shareholder value. It allows us to reposition for future growth. You know, the decision really is around, you know, making the right choice on a go-forward basis for where we are today. Yeah, it's absolutely, we're a little bit smaller, and, you know, I think from a business perspective, yes, when you look at the businesses, we're maybe more concentrated on the AC side. But when you look at the value creation of where our money is coming from and how we're doing with regards to growth, it really positions us really well moving forward.
There's no question about that. So this is really more about today. It was about the pace that we were seeing the transaction moving forward at, and, you know, we made the best decision, which we think is an absolute right decision, given where we're at today.
Yeah, it's hard to disagree. The market was definitely not valuing your RAL business appropriately. Maybe just on a comment you made earlier, Colin, you know, you said you've been deploying a lot of your capital into growing RAL, which seemed to suggest that maybe there are opportunities within Voyageur that might have fallen through the cracks. Maybe you can update us in terms of what that pipeline of opportunity is, both organically and inorganically, and maybe, you know, how that might accelerate under this, you know, under this, I guess, this new Chorus, where you know you obviously have a different capital structure, and this will now be a focus of your growth.
Sure, absolutely. Yeah, as you said, you know, going forward, we're going to focus on the aviation service side of the business, where there's considerable growth opportunities. We see it both organically and through acquisition. You know, we are focusing on getting, you know, the organization to a point where we have nice, solid, stable growth profile. And since, you know, I assumed responsibility there in 2023, we've been doing a lot of work on assessing the industry opportunities and looking at, you know, where we would move with time. We said that at our investor day, that we were starting to assess these opportunities, and what was really important for us to get through the deleveraging process. This expedites us. This, this moves us much quicker.
And, to this point, we've been very, you know, very much investing in the leasing side. We haven't put a lot of money into Voyageur or anywhere else really, other than the leasing since 2017. So this gives us a new opportunity going forward. It'll allow us to reset and shift the intensity of focus on these other, other sectors, and look for considerable growth. You know, post-transaction, we're gonna have three great, strong, very stable subsidiary business. You know, when you, when you look back at it, we've got Jazz, which is, strong, one of the third-largest airlines in Canada. We've got Voyageur, who's done an incredible job of, of growing this last couple of years, and we've got, the new business, which is just on its, you know, kind of beginning of growth, which is Cygnet.
Mm-hmm.
You know, we see that as kind of a strong, stable background to move forward with.
Okay. That, that's helpful. And maybe just a clarification question. This might be for Gary. Because the transaction is being announced in late July here, is the RAL segment, is that discontinued operations? Will that be, I guess, segmented as discontinued operations in your, in your upcoming second quarter results, or is that something we should be looking forward to in your, in your third quarter results?
We would look to put it into discontinued operations in Q2.
In Q2. Okay, perfect. Thank you. Thank you for taking my questions.
Thanks, Kevin.
Your next question comes from Konark Gupta with Scotiabank. Your line is-
Thanks, and good morning, and congratulations on the announcement today. Just wanted to ask you about, you know, the remaining company. You know, what's left out there for you guys in terms of, you know, continuing operations is Jazz, obviously, and then Voyageur, plus Cygnet, which you launched recently. You know, given, you know, Jazz has been in sort of a new contract regime, which goes to 2035, and there is a few kind of, you know, call it, step down functions, and then the fixed fee, and then I think the leasing also kind of fluctuates a little bit from year to year.
So, you know, like I know you in the presentation, you kind of disclosed that your pro forma 2025 EBITDA with those changes in fixed fee and leasing, with something closer to like 180-ish or 182 EBITDA in 2025. You know, like if we take that as a base, you know, do you have set any objectives to, you know, kind of grow from that CAD 182 million EBITDA base to some level? Or should we expect that to be more or less like flat lined for a few years? How should we think about, you know, your EBITDA prospects in the next five years, call it?
Well, Konark, it's Gary here. We see it as growing. Colin alluded to it earlier. Voyageur has been growing, since 2019, when he took a lot more leadership over that piece. It is one of the largest, suppliers of parts in the industry. It's got a good contract with Purolator. It's growing a lot of their other businesses, so we see a growth profile there. What we provide you there is a way to you, for, for the analysts in the back, the deck, so you can at least be able to model the EBITDA. But that would be the minimum you would see, and we'd expect it to grow from there, and we'd expect to improve it from there.
But it gives you an idea of a solid base we have, and that's what I would, you know, reiterate here, too, is we have still a very sizable company producing good free cash flows after debt repayments, and it has a lot of growth and other options in front of us.
Yeah, I think, Konark-
Okay. Sorry.
I'll just add to that, look, we've been doing a lot of work on this area. We alluded to it in early 2023. We really haven't been able to do, you know, execute on anything given the fact that we've been focused on selling down assets. But, you know, as we get through this transaction and it closes, I will have a lot more to talk about and to say on this topic for sure.
Again, that's-
Konark, the other thing I'd point out is, if you look at the leverage, we're at 1.8 pro forma. As we pay down that debt within the CPA, we'll have our debt continue to reduce. So we have, you know, a good position from a balance sheet perspective. We have a great position from a free cash flow less debt payment position, and we're even in a better one when you look at the market and what Voyageur and Jazz are in aviation to grow the company.
Right, that makes sense. Thanks. That's very helpful. And, you know, I think you kind of showed some math on the free cash flow as well, pro forma. So I just want to understand, like, you know, your EBITDA is what it is, and then, you know, your CapEx had not been pretty significant in the existing continuing operations, I guess, right? And, you know, when we convert sort of your free cash flow from call it EBITDA or something, is there like a guideline where you would like to be on conversion basis?
Like, you know, is it like 50%, 80%, something like that, or is there, is there another way to kind of think about how should we arrive sort of at free cash flow after, you know, the CapEx and some of the nuances between EBITDA and free cash?
Yeah. So no, we don't have a target necessarily, Konark, but I think you need to remember the contract we have that drives most of that, which is the Air Canada contract. The Air Canada contract has the CapEx recovered from in the rates and whatnot. So at the end, they pay us for the CapEx on the maintenance side and that, so it makes its way out. And I think if you just look at what we put out there for the free cash flow after debt payments, it gives you a very solid base, with which to move forward. We can follow up with you on some of that stuff, too, Konark. I think we got a one-on-one probably coming with you today, I would imagine.
Perfect. No, that's great. Thanks. And last one for me before I turn it over. On the CPA, now that, you know, the Falko and the leasing business is kind of out of the mix, does it give you maybe sort of a little bit of a push or, or incentive to kind of, you know, reengage, with Air Canada, to rethink about the contract, given the capital and the balance sheet you have now it's much different than before? I mean, like, is there a possibility to reopen the contract, or you're kind of locked in through 2035?
So look, with the relationship with Air Canada and our contract, we're talking to them every day about stuff, and we continue to look at opportunities with them. Absolutely, you know, we're engaged with them. We're looking for opportunities. There's lots of stuff for us to talk about. There's lots of potential as we move forward for sure. So we'll see as things transition here, but this will allow us to focus more on this business and be more focused on the aviation operational side of the business, the services side, which will definitely, you know, I think, be more meaningful from Air Canada's perspective. It really gives us a focus back on them and the other opportunities that exist around them.
Right. That makes sense. Thanks for the time. Thank you.
Okay, thanks, Konark.
Next question comes from James McGarragle with RBC. Your line is now open.
Hey, thanks for having me on, and congrats on the transaction announced this morning. I wanted to ask a question on, you know, your free cash flow priorities. Obviously, you know, there's gonna be some meaningful free cash flow, especially relative to your market cap post this transaction. So, you know, how are you thinking about your priorities on free cash flow right now between M&A, organic investment, and shareholder returns?
Yeah, good question. Look, our priority right now is to make sure we close on the transaction, get through all these kind of customary things we got to get through. We're absolutely looking at those options, all of them, and considering them. We're gonna have free cash flow, as you allude to. It's actually building cash, as Gary is saying, go forward basis. So all of that will be evaluated, looked at. We're considering it right now, and we'll have more to discuss, as time progresses here. But our first priority right now is just to make sure we get through the transaction, address our debt, do all the things we got to do that are, you know, that we've talked about here.
And then, just one follow-up on the balance sheet. You know, you were coming into the transaction call, you know, just above three. You're at 1.8 right now. You know, where would you like that to trend, going forward? Just so, you know, for modeling for, you know, any potential buybacks, M&A, kind of, where would you like to see the balance sheet, after this transaction closes? Thanks.
Yeah, it's Gary here. You know, we still have our target range of 2.5-3.5, but we'll revisit all these measures post-transaction. And as I alluded to earlier, the debt with Air Canada or on the Air Canada CPA aircraft continues to go down, so you're gonna see our debt profile continue to go down, which will provide us opportunities.
Appreciate it, and I'll turn the line over. Thank you.
Thank you.
Your next question comes from Fadi Chamoun with BMO. Your line is now open.
Okay, thank you. Good morning. Colin, I just wanna dig into the kind of medium, longer term, kind of, growth or framework for the company going forward. I mean, you know, a few years ago, you identified the leasing business as kind of the growth vertical, and, you know, ultimately, you're recognizing today that market didn't recognize your, you know, your strategy in that segment. Now, you've got a CPA that is stepping down in the next couple of years as well. How do you grow the business from here? Like, you talked about M&A, mentioned defense, training, you mentioned a few other verticals. Are we talking about significant M&A here, or are we talking about tuck-in M&A? I'm just trying to understand kind of what is the path forward from here, from a growth perspective.
Yeah. Okay. Hi, Fadi. Good question. Yeah, look, we're very focused on the services side, as we're saying, and we believe... We've been saying that since 2023. When we came out with the investor presentation in 2023, we were very focused at that point, and we were looking at selling down assets. We've been saying that as well. Really, the only shift here is the fact that we to obtain, you know, really good value for our assets, we felt that and the fact that the asset light business was slow, the pace was slow, we felt the absolute best choice was to transact in this manner to optimize the value. So we're still, you know, the path of growing in the operational side and looking up, you know, those kind of services businesses hasn't changed.
It continues to be, as I said, we've been looking at a lot of those opportunities. It is not. You know, we're not chasing a big bang here. We're focused on finding a nice, gradual, steady growth, business that, you know, we can add to. There's a bunch of organic opportunities. We haven't been investing on the operational side. There's a bunch of organic stuff we can do there. And then there's, you know. Some bolt-on, some smaller acquisitions and medium-sized ones that we'll be looking at as we, as we get through this transaction coming the end of the year kind of thing. But it's really about finding a nice, stable, solid growth profile over time. That's, that's, that's the focus where, where we're at.
Okay. And any vertical in particular that you feel has kind of, you know, more opportunities for you to go after? Because you mentioned a few of them, but-
Yeah.
I'm not sure if there's anything in particular you're looking at.
You know, we've talked about a bunch of different ones over time. You know, we're not married to really any specific one. You know, we're interested in value creation here. That's our focus. So we're gonna be pretty open-minded, and we're interested in nice, gradual, stable growth. And that, that's the fundamentals of everything we're doing here, is finding the right-- making the right decision at the right time. As Gary said, we're positioning the company with really strong liquidity, very low leverage, building cash, all of the right things you need to be able to move forward. And, you know, once we-- as we get close to closing the transaction and dealing with some of these customary things we've got to get through, we'll, we'll, we'll have a lot more to talk about and, and discuss with you guys for sure.
Okay, thank you.
Your next question comes from Cameron Doerksen with National Bank. Your line is now open.
Yeah, thanks. Good morning. Maybe just a couple process-related questions. You know, obviously, this was a fairly robust process that you've gone through. Was there any, I guess, consideration or any offers to, you know, to sell the entirety of the business and not just the RAL segment?
Hi, Cameron. It's Colin. Look, you know, they. As I said, in my script there, you know, we were out marketing a large portfolio, like, a meaningful portfolio, over 50 airplanes. And, of course, you're really dealing with large, capable organizations that have a lot of financial backing at that stage. And we started to receive these unsolicited offers for the full platform. You know, at that point, we looked at our options, and we did a lot of valuation, a lot of analysis. We, you know, worked with the board. The management team and the board did a ton of work on this to make this decision. It wasn't just something that, you know, popped up and we decided to go with it.
So following, you know, that great length of kind of evaluation and consideration, we decided that, look, this was a good opportunity for us. This was the best opportunity to transition the company a little bit quicker, and obtained, you know, really strong value for our assets. So that's kind of where it came from. There really was, you know, nothing more to it than that, to be quite frank.
Okay, great. No, that's helpful. And just as far as, I guess, the timing of closing, you've indicated by the end of the year. Is there any more sort of specificity you can provide there, or maybe just talk us through what the milestones are here, for when you expect a shareholder vote, that sort of thing?
Yeah. So the SPA will come out shortly in the next day or two. It'll be on SEDAR+, so that, that will give you some information on, shareholder meeting and stuff like that. You know, I think typically four weeks for the circular, another four weeks for the meeting kind of thing. You know, that's, that's kind of the general, but I can't tell you specifically at this stage, but it will be all on, on SEDAR+ and the SPA, and you'll be able to pick that up. We honestly can't do anything more than give you a sense as towards the end of the year. There's a lot of regulatory type things that have to happen that are not really in our control in any way.
So you know, you'd be asking me to speculate on a date, and I really couldn't tell you. The lawyers and all the experts feel that it'll definitely be done before the end of the year.
Okay, and what are the key regulatory approvals that are required?
Regulatory approvals, the majority are just routine merger clearances. And there, there's a bit of an explanation in the SPA, that'll be on SEDAR here shortly, that'll gives you a little bit more deal detail, but it's really just routine merger clearances and regulatory stuff.
Okay. Okay, well, I'll wait for the detail there. That... All the other questions I had were answered, so appreciate it. Thanks.
Okay, take care, Cameron.
Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the one. Your next question comes from David Ocampo with Cormark Securities. Your line is now open.
Thanks for taking my questions. Just two quick follow-ons. I mean, there's been a lot of discussion around the future of the business, where growth is gonna come from. If I take a look at your pro forma ROE now, it's closer to 11%. So when you guys are looking to deploy capital, is that the new hurdle rate you guys are using, or are you evaluating opportunities for returns greater than 11%?
Yeah, it's Gary here, David. We're targeting mid-teens ROE. That's giving you a base of where it starts, you know, on a pro forma basis. It's a significant improvement from where we were and what we hope to continue to improve it, so.
Okay, and then last quick one. I mean, if I take a look at the use of proceeds, CAD 490 million is being used to put away the preferred notes. Looks like there's a bit of a premium there. Can you walk us through the math, Gary, if you can, over the call?
... Sure. We have the option to take out the Brookfield preferred shares here in May or on the third anniversary. It has a MOIC of 1.4. That 1.4, you deduct all the dividends you paid to date when you come up with that number, and that's basically how you come up with the premium that you pay. It's basically early paying off the dividends, and then you pay the face value out. That's how it works. So CAD 300 million plus, I think it's about CAD 63 million in dividends.
Okay, that's helpful. Thanks so much, guys.
Okay, thank you.
Next question comes from Tim James with TD Securities. Your line is now open.
Hi, Tim. Hey, Tim, you there?
I'm here. Can you not hear me?
Yep, we can hear you now, just barely.
Okay. Yeah, I just had one quick question. And forgive me if you covered this off already. I missed a couple minutes of the call. But in terms of the remaining corporate expenses that are in the business, is there any sort of basis or ability to reduce that once the leasing business has been transacted around the Chorus? Or how should we think about those remaining corporate expenses?
Hi, Tim, it's Colin. So look, as time progresses here, when we get through this transaction, we will definitely be looking at our corporate expenses and how things move forward. There's no question about that. And there are some things that change with regards to you know, various payments that we're making and so on. So that will evolve with a bit of time. But right now, I mean, there's no direct impact or no impact plan for any employees or anything. That's all status quo. We're gonna need everybody as we move forward and continue to look at our growth profile here and doing what we need to do. But we can touch with you on some of that stuff if you want, what's in and what's out going forward in the one-on-ones.
Okay, that's great. Thank you very much. That's, that's the only question I had at this point.
Thanks, Tim.
There are no further questions at this time. I will now turn the call over to Tyrone for closing remarks.
Thank you, Joelle, and thank you all for taking part in today's call. Have a good day.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.