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

RE: RE: RE: Buy back

[Mongoose11]

I just did a bit of research. Clairvest issued the 70 million debenture to DA on Sep.23'11. The day before that DA.A was trading at 4.25/share. It is now at 2.90/share. In the meantime they are accruing 10% interest income on the loan and have as security the assets of the entire company other than certain AR and inventory that may be collateral for any operating lines of credit that are outstanding and certain aircraft that are financed with other specific loans. As a matter of comparison, the 31 million public convertable debentures are only paying 8.375% and are unsecured.

They also have 2 board members. As far as I'm concerned Clairvest is charging an excessively high interest rate and the fact that they are secured higher than the public debentures seems like an additional unfair advantage to them, particularly since their interest rate is notably higher. The restrictions that have been placed on the company are a further hindrance.

All in all I feel that Clairvest has negatively affected DA since they bought in. The common shareholders like us ultimately are suffering the consequences. I believe that as the 10% annual interest accrual keeps building up (an extra 7 million of debt every year) that Clairvest will simply be increasing their control of DA without the risk that they would have taken had they purchased equity instead of debt. Sweet for them, not so much for us. This may be why the volume and interest from Bay street is so low.