Clarke adds reason to extend 6% notes by five years: good governance

By Susanna Moon

Chicago, July 17 - Clarke Inc. said it would like to extend the maturity of its convertible notes despite access to lower-cost financing because it gives the company added flexibility to pursue its investment strategy.

As previously noted, the company is seeking holder approval to amend its C$63 million of outstanding 6% convertible subordinated debentures due Dec. 31, 2013.

Clarke is providing more information and clarification regarding the proposed changes in response to investor inquiries, according to a press release.

The proposal is "a matter of good corporate governance," the company said in the release, as Clarke "continuously evaluates and seeks to optimize the company's capital structure. Clarke's objective in this regard is to ensure that Clarke maintains its flexibility to pursue its investment strategy and to continue to build value for all its various securityholders."

The company said it has committed credit facilities and marketable securities of more than C$125 million. The company could draw on these loans and use the proceeds to redeem the convertibles. The interest rates on the facilities "are substantially lower" than that of the notes, the release added.

"While Clarke is currently able to borrow funds at a substantially lower cost than under its existing debentures, these debentures do give the company increased flexibility to execute on its investment strategy," George Armoyan, chief executive officer of Clarke, said in the release.

"Rather than using available credit facilities or raising new capital to redeem our existing debentures, we wanted to reach out to our existing debentureholders and invite them to remain a financing partner of Clarke for another five years at an attractive interest rate."

The company pointed out the advantages of continuing to receive a 6% interest rate on the convertibles given the current low interest rate environment and in light of other reinvestment opportunities available.

Proposed amendments

Clarke said on June 19 that it will seek holder approval to amend its 6% convertibles at a meeting to be held on July 25.

The company is asking for approval to extend the maturity of the notes to Dec. 31, 2018 and to eliminate the ability of holders to convert the notes into the company's common shares.

The proposed amendments also include eliminating the company's ability to repay the principal amount of the debentures through the issuance of common shares on redemption or maturity.

Holders who vote for the amendments will receive a fee of C$6 per C$1,000 principal amount of notes. The payment is conditioned on garnering approval from holders of at least 66 2/3% of the principal amount of the notes present or represented by proxy at the meeting.

Along with the consent fee, the company will pay a soliciting dealers' fee of C$4 per C$1,000 of notes to soliciting dealers that are entitled to receive the fee.

The company's board of directors unanimously recommended that the holders vote for the amendments, according to a previous release.

Halifax, N.S.-based Clarke is a diversified group with businesses in freight transportation, shipping, real estate and information technology.

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