Polaris reveals bridge loan, eyes more funds; AbitibiBowater gets Fairfax injection; Migo plans critical sale

By Kenneth Lim

Boston, March 24 - Polaris Geothermal Inc. said its C$27 million financing was a bridge loan and should take it into the third quarter when a key project financing deal should be closed.

Meanwhile, AbitibiBowater Inc. placed $350 million of convertible debentures to Fairfax Financial Holdings Ltd. in a deal that the company described as a key piece of a bigger financing strategy.

Migo Software Inc. said it hopes to keep afloat by selling about $5 million of senior preferred stock with warrant coverage to new investors, who would end up with more than 90% of the company's stock on a diluted basis.

Polaris to raise C$27 million

Polaris said it is selling C$27 million units of debentures, warrants and penalty rights to a major shareholder.

The deal, placed through Jacob & Co., involves 27,000 units at C$1,000 apiece. Each unit comprises a C$1,000 9½% senior secured debenture, 667 warrants and 75 penalty rights.

The 18-month debentures may be called at any time by Polaris. Each warrant is exercisable at C$1.50 per class A voting common share for two years. The warrants will expire sooner if the company's class A common shares close at C$2.25 or higher for 40 consecutive trading days.

Polaris class A stock (TSX: GEO) closed at C$1.05 on Monday, higher by 1.94%, or C$0.02.

Each penalty right is exchangeable for one class A share, with 25 rights exercisable every six months plus one day after closing, provided the accompanying debenture has not been converted.

Skyberry Holdings Ltd., a Bahamian business corporation and holder of about 22% of Polaris' class A shares, is expected to subscribe for about 20,000 units.

Polaris, a Toronto-based energy company, said it will use the proceeds to retire an existing series of 9% redeemable secured debentures and for general corporate purposes.

"What we're putting in place right now is debt financing," Polaris chief financial officer John Clark told Prospect News. "It's bridge financing. We are in the process of finalizing our construction debt, and that process has taken a little longer than originally scheduled, and what we're doing is bridging that financing until we can close the construction financing either at the end of the second quarter or the beginning of the third quarter this year."

The financing will simply tide Polaris over until its development plans become firmer, he said.

"This debt, what it will do is refinance our existing debenture debt, and it gives us the balance as working capital, keeping us secure until we complete the construction," Clark said. "We had originally scheduled the debt financing to close a couple of months earlier. Now it's just a different form of debt. The use of the proceeds will really be the same, which will be used with our construction financing to raise our project in Nicaragua from 10 megawatts to 34 MW. This debt will be refinanced out of our construction debt once that is in place and we won't have to worry about it after that."

Clark said he was hoping for better pricing of the deal.

"We'd have liked it a little cheaper, but in the grand scheme of things I suppose it's OK," he said.

Polaris will continue to seek capital even after that project financing is in place, Clark added.

"Our resource down in Nicaragua has potential for 200 MW," he explained. "We are at this stage only building 34 MW, and after that we have, in various stages, about another 160 MW, which is about C$5 million to C$7 million of project sizes, so we will be looking to finance those projects. In fact, we are already trying to go from 34 MW to 72 MW, and so we would be putting that financing in place over the rest of this year."

Debt is likely to continue to be a main feature of subsequent fundraisers, he said.

"A big component of that will be debt," Clark said. "We may have to put in a little bit more equity, we may have to do an equity issue, but that has not been decided yet."

Existing shareholder Skyberry was an eager participant in the fundraising, Clark said.

"We just kind of canvassed the market, and on a first-come first-served basis," he said. "They [Skyberry] said they would participate."

AbitibiBowater lands Fairfax

AbitibiBowater said it will issue $350 million of convertible debentures to new investor Fairfax Financial.

The deal involves 8% convertibles due 2013 with an initial conversion price of $10.00 per share. That represents a 2.35% premium to AbitibiBowater common stock's (NYSE: ABH) closing price of $9.77 on March 20 but a 26.25% discount to its Monday close of $13.56.

AbitibiBowater, a Montreal-based producer of newsprint and commercial printing papers, pulp and wood products, said the proceeds will be used to repay debt as part of a previously announced $1.5 billion refinancing package.

Fairfax will also have the right to appoint two directors to Fairfax's board under the investment agreement.

"We have some immediate debt that is due in April and June, and we are taking a more comprehensive approach to it and we are restructuring our debt," AbitibiBowater vice president of communications and government affairs Seth Kursman told Prospect News. "This is a very important and encouraging development. It's a very important piece of the pie ... of what needs to be done and we are encouraged and there's more to be done."

Migo plans for new investors

Migo Software said it has entered into a term sheet for a proposed $5 million financing.

The financing would create a senior class of preferred stock with warrant coverage and the investors, who do not currently have any stake in the company, would receive more than 90% of the company's stock on a fully diluted basis.

The term sheet would require that Migo's outstanding junior A preferred shares and its series B preferred stock convert into common stock and that existing warrant holders agree to waive the anti-dilution clauses of their warrants.

The company also must initiate a 1-for-15 reverse stock split, which already has been authorized by stockholders.

Redwood, Calif.-based Migo Software, formerly PowerHouse Technologies Group, Inc., is a provider of mobile data and communications software.

In a statement, Migo called the deal "critical to its continuing operations."

"If the company is unable to complete this or an alternative financing within the near future, the company will not likely be able to continue operations in its current form," the company stated.

Migo representative Susan Taylor said the company could not comment beyond the press release.

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