Deal with Clairvest offers 5.5-year debentures convertible at C$0.75
By Devika Patel and Rebecca Melvin
Knoxville, Tenn., July 22 - Discovery Air Inc. said it will conduct a C$70 million private placement of 5.5-year 10% secured convertible debentures.
The company will sell the convertibles to Clairvest Group Inc. Interest on the debentures will be payable in kind.
The debentures will be convertible into 93,333,333 class A common shares for an initial conversion price of C$0.75 per share. The conversion price represents a 70.46% premium to the closing share price of C$0.44 on July 21. The company may redeem the debentures after three years.
The conversion price will also be subject to a 10% per annum increase, and the original face amount of the debentures plus all paid-in-kind interest will continue to be convertible into 93.33 million common shares.
Discovery Air also announced that it intends to consolidate its shares outstanding by a 10:1 ratio.
The debentures are non-callable for three years and then are provisionally callable subject to the share weighted average trading price exceeding 116% of the then-applicable conversion price.
The debentures have takeover protection and first-lien security interest in Discovery Air assets except for assets already pledged to Northwest Territories Opportunities Fund, another senior lender to the company.
Settlement is expected on Sept. 30.
Proceeds will be used to repay debt. Clairvest will also have the right to nominate three directors to the company's board of directors, which currently consists of six members and will be increased to nine members.
"We are very pleased with this financing and are excited to have the Clairvest team as financial partners going forward," president and chief executive officer Dave Jennings said in a press release.
"While our cash flow and liquidity have been strong under our existing capital structure, the terms of this deal will greatly enhance our cash flow, allowing us to pursue the aggressive growth we're targeting in the short and medium term future.
"The in kind interest combined with the escalating conversion price make this convertible debt deal as close to an equity deal at appropriate prices as is reasonably practical in today's market," Jennings continued.
"The terms allow us to eliminate many of the cumbersome financial and other restrictions in our legacy senior debt arrangements. This will give us significantly more flexibility to deploy assets and manage the business effectively. Clairvest's agreement to subordinate its security position in favour of new senior debt is important in positioning us to raise funding as required for future projects that support our growth strategy.
"And finally," Jennings said in the release, "the addition of Clairvest's nominees will bring additional depth to the corporation's already-strong board of directors. Closing of this transaction will complete the capital structure overhaul we began early in 2011 and will position Discovery Air to both better support our existing customers and to target aggressive growth in new markets."
Toronto's Discovery Air operates subsidiaries that provide helicopter services to the private sector, including Canada's mining industry.
| Issuer: | Discovery Air Inc.
|
| Issue: | Secured convertible debentures
|
| Amount: | C$70 million
|
| Maturity: | 5.5 years
|
| Coupon: | 10%
|
| Conversion price: | C$0.75
|
| Conversion ratio: Into 93,333,333 shares
|
| Call: | After three years
|
| Warrants: | No
|
| Investor: | Clairvest Group Inc.
|
| Pricing date: | July 22
|
| Settlement date: | Sept. 30
|
| Stock symbol: | Toronto: DA.A
|
| Stock price: | C$0.44 at close July 21
|
| Market capitalization: | C$64.44 million
|
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