DISCOVERY AIR INC 8.375 PCT DEBS T.DA.DB.A

RE:DA defence valuation & other asset valuation

[Alejaho]

I don't know the valuations of other assets under the DA umbrella, however it is highly suspect that clairvest obtained this conversion refinancing on DA Defense shares only a few weeks prior to DAD's announcement of the billion dollar contract. Even when the 60m of secured debt is removed from the parent's books, at ten percent interest that saves 6m a year whereas the parent is currently running a 20m annual loss. How will DA finance paying out 35m in unsecured debentures running such losses and having lost their best asset likely at a fraction of its real value? The NPV of that DADS contract has got to be in excess of 100m, and other pending contracts would increase DADS' valuation. If clairvest came clean about valuation there might not be grounds for us to complain. However, my guess is they are going to try at the least railroad unsecured debenture holders into extending their bonds while clairvest further sucks out whatever value remains in DA, until it formally goes bankrupt. As Stan suggests, I can see legal action as the only way to protect debentureholders' interests.