News out: big dillution coming, and rollbackDISCOVERY AIR ANNOUNCES AGREEMENT TO ISSUE $70 MILLION OF SECURED CONVERTIBLE DEBENTURES AND INTENTION TO EFFECT 10:1 SHARE CONSOLIDATION
Discovery Air Inc. has entered into an agreement to complete a private placement of an aggregate of $70-million principal amount of secured convertible debentures. Net proceeds of the transaction will be used to repay existing debt owed to certain of the Corporation's lenders. The Debentures will be issued to Clairvest Group Inc. and certain of its affiliates.
As of the date hereof, Clairvest owns, directly and indirectly, 595,207 Common Shares of Discovery Air, representing less than 0.5% of the Corporation's issued and outstanding Common Shares. Upon closing of the Private Placement, and before giving effect to the Corporation's share consolidation plan discussed below, the Debentures will be convertible into 93,333,333 Class A common shares for an initial effective issue price of
.75 per Common Share, subject to anti-dilution adjustment provisions. The 93,333,333 Common Shares represent 64.12% of the Corporation's currently issued and outstanding shares and, on a fully diluted and "as converted" basis, represent 32.33% of the Corporation's issued and outstanding shares. Clairvest acts at arm's length to the Corporation.
The Debentures will mature 5 A one-half years from issuance, subject to earlier redemption rights in favour of the Corporation relating to certain milestone events by Discovery Air's Top Aces Inc. subsidiary. The Corporation may also redeem the debentures three years after issuance providing the Common Share weighted average trading price exceeds 116% of the then-applicable conversion price over an agreed trading period prior to issuance of the redemption notice. Interest on the Debentures will accrue at a rate of 10% per annum and will be payable annually commencing 12 months after closing on an "in kind" basis through the issuance of additional Debentures. The original conversion price of the Debentures,
.75 per Common Share, will also increase at 10% per annum, and as a result, the original face amount of the Debentures plus all paid-in-kind interest will continue to be convertible into 93,333,333 Common Shares (subject to customary anti-dilution adjustments). The Debentures shall have a first-lien security interest in all assets of Discovery Air and its subsidiaries except with respect to accounts receivable and certain inventory, and except with respect to certain assets already pledged to the Northwest Territories Opportunities Fund, another senior lender to the Corporation. The Corporation will have the right to require full subordination of the Debentures' security interest in respect of new indebtedness upon the achievement of agreed milestone events by Discovery Air's Top Aces Inc. subsidiary. Prior to any of the milestone events being achieved, the Corporation can require subordination of the Debentures' security interest in yet to be acquired assets in an amount up to $50 million.