Chosen to invest in the troubled carrier, the tycoon's private company will pay $3.7b for a 31pc stake Tycoon Victor Li Tzar-kuoi has outbid American private investment firm Cerberus Capital Management in their tussle to rescue debt-laden Air Canada, triggering what could be the Li family's maiden foray into airline management. Mr Li's privately held Trinity Time Investments was selected to invest in Air Canada, the flag carrier said in a statement over the weekend. Mr Li is the eldest son of billionaire Li Ka-shing, whose business empire includes property developer Cheung Kong (Holdings), telecommunications-to-container terminal operator Hutchison Whampoa and Canadian oil producer Husky Energy. Under the agreement, Trinity will pay C$650 million (HK$3.77 billion) for a 31 per cent stake in a restructured Air Canada, which owed about C$12 billion in debt and long-term lease commitments when it filed for bankruptcy protection on April 1. Creditors with aggregate claims of up to C$10 billion will own about 56 per cent of the airline while existing shareholders will see their equity diluted to 0.01 per cent. Mr Li will be entitled to designate five of the airline's 11 board members after the restructuring. Deutsche Bank, which will underwrite a C$450 million share offer to creditors, will have two board representatives. Two Air Canada managers will also sit on the board. Mr Li's investment and the creditors share offer will raise a combined C$1.1 billion of fresh capital for the troubled carrier. The deal is subject to the funding resolution of the airline's C$1.5 billion pension-plan deficit as well as approval by regulators, creditors and the courts. It must be closed no later than April 30. A 'break fee' of C$19.5 million may be payable to Mr Li should the deal fall through. As a Canadian citizen, Mr Li is not restricted by Canadian investment regulations that bar foreigners from owning more than 25 per cent of local companies. The Li family's investment activity in Canada dates back to as early as 1987, when Li senior bought into Husky Oil, which was merged with rival Renaissance Energy in 2000. He also bought Toronto-based investment bank Gordon Capital in 1996 and sold it three years later to HSBC. 'We have full confidence in [Air Canada's] senior management team and will continue to work with them over the coming months to complete the steps which will reshape Air Canada into a leading competitor in the air transportation sector globally,' Hutchison Whampoa finance director Frank Sixt said in a statement issued on behalf of Victor Li. Mr Li will fund the purchase from his personal financial resources, which may include investment from other family holdings. The deal is not subject to financing conditions. Mr Li said earlier that the Li Ka-shing Overseas Foundation may partly finance the acquisition but the family's publicly listed firms would not. Battered by traffic declines stemming from September 11, the Iraq war and the Sars outbreak, Montreal-based Air Canada suffered a first-half net loss of C$836 million on turnover of $4.16 billion and has seen its share price fall 81 per cent over the past year. Last year it posted a net loss of $828 million following a loss of $1.25 billion in 2001. Chief executive Robert Milton has said the company expects revenue shortfall to amount to C$850 million this year with no meaningful recovery expected before the third quarter of next year. About 8 per cent of the carrier's workforce was let go, while salary cuts and work-rule changes were implemented to further reduce costs and bolster productivity. The company said it had a cash balance of C$893 million on October 28 and it had about $1 billion of undrawn credit facilities. Fully privatised in 1989, in 2000 Air Canada acquired Canadian Airlines International - the country's second-largest carrier at the time - and became the world's 10th-largest commercial airline.