Discovery Air Announces Debt Repayment and Debt-for-Equity Conversion with Related Parties

YELLOWKNIFE, NT, April 18 /CNW/ - Discovery Air Inc. ("Discovery Air" or the "Corporation") announced today that it has entered into an agreement (the "Agreement") to repay approximately $13.5 million in aggregate debt owed by the Corporation to a senior officer of Discovery Air and a senior officer of Great Slave Helicopters Ltd. ("Great Slave", a wholly-owned subsidiary of the Corporation) (the "Related Parties").

The proposed debt repayment and debt-for-equity conversion (the "Transaction") will repay indebtedness of the Corporation arranged prior to Discovery Air's acquisition of Great Slave in June 2006. Under the Agreement, the Transaction will be funded with a cash payment of approximately $3.2 million in the aggregate together with the issue from treasury and transfer to the Related Parties of approximately 10,300,000 Class A common shares of the Corporation. Based on the $0.43 closing price of Discovery Air's Class A common shares as at the day before the Agreement, the Class A common shares to be issued under the Transaction are valued at approximately $4.5 million. The Transaction is expected to result in a pre-tax gain of $5.5 million to the Corporation.

Closing of the Transaction remains subject to Toronto Stock Exchange ("TSX") approval and shareholder approval (if required by the TSX). Discovery Air intends to close the transaction described herein by April 29, 2011 (the "Planned Closing Date"), subject to receipt of all necessary approvals including the approval of the Toronto Stock Exchange.

The Planned Closing Date would be less than 21 days from the date of this material change report. Under NI 61-101, Discovery Air is required to disclose why it feels it is necessary or desirable to close the transaction prior to the 21st day from first disclosure of the proposed transaction. In this case, management of Discovery Air believes it is in the Corporation's best interest to book this transaction before month-end in order to realize the balance sheet benefits of the transaction and accelerate reduction of its fiscal 2012 interest expense, both commensurate with its overall recapitalization planning.

"We are very pleased to have reached this agreement in principle," commented Dave Jennings, President and CEO of Discovery Air. "This transaction is an important part of our plan to recapitalize Discovery Air in a way that better supports its operations and growth. The transaction reduces consolidated interest expense and total debt outstanding, increases shareholder equity and helps reduce the leverage in the Corporation's capital structure. It also represents a very tangible expression of confidence in Discovery Air's future prospects. We intend to continue working to overhaul and simplify our capital structure."

Related Party Transaction

The Transaction is a "related party transaction" under National Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("NI 61-101") because the parties include a senior officer of Discovery Air and a senior officer of Great Slave. The Directors of the Corporation, who voted unanimously in favour of the Transaction at a Board of Directors meeting held on April 1, 2011, have determined that exemptions from formal valuation and minority approval requirements available under NI 61-101 apply to the Transaction, because neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the Transaction, exceeds 25 percent of the Corporation's market capitalization as of the date of the Agreement. Factors considered by the Board of Directors in reviewing the Transaction included the value ascribed to the treasury shares to be issued by Discovery Air at closing (being $1.00 per Class A Share - a 133% premium to the closing market price of the Corporation's shares on March 31, 2011) and the reduction in consolidated debt service requirements and consolidated leverage achieved by the Transaction.

On closing of the Transaction, the Related Parties, Adam Bembridge and Ian Campbell, will directly and indirectly hold 23,451,427 shares and 23,450,582 shares in Discovery Air, respectively, compared with 18,275,427 and 18,274,582 shares prior to closing of the Transaction. The respective shareholdings at closing will each represent 16.1% of the issued and outstanding shares of Discovery Air on a fully-diluted basis, compared to 13.5% each prior to closing.

ABOUT DISCOVERY AIR

Founded in 2004, Discovery Air Inc. is a specialty aviation services company operating across Canada and in select locations internationally. With over 130 aircraft, it is one of the largest air operators in Canada, employing more than 600 flight crew, maintainers and support staff to deliver a variety of air transport, maintenance and logistics solutions to its government, airline and business customers. The Corporation's subsidiaries include: Top Aces, which delivers airborne training and special mission services to the Canadian military; Hicks & Lawrence, a supplier of airborne fire management services to the Ontario government and charter services to government agencies and corporate customers; Discovery Air Technical Services, which provides a range of maintenance, repair, overhaul, modification, engineering and certification services; Great Slave Helicopters, the second-largest VFR helicopter operator in the country; Air Tindi, the largest fixed-wing aircraft charter provider based in Northern Canada; and Discovery Mining Services, which supplies all-weather exploration camps as well as expediting and logistics support services; and Discovery Air Innovations, the innovation arm of Discovery Air that identifies and captures large, new market opportunities.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Discovery Air's public communications may include written or oral forward-looking statements (as defined in applicable securities laws) regarding the future performance of the company and/or its subsidiaries. Forward-looking statements by definition are based on assumptions and are as a result subject to risks and uncertainties, including those identified in the Management's Discussion and Analysis section of Discovery Air's financial statements for the fiscal year ended January 31, 2010, available at www.sedar.com. As a result of such risks and uncertainties, actual results may differ materially from those discussed in forward-looking statements, and readers should not place undue reliance on such statements. Forward-looking statements represent expectations as of the date they are made, and Discovery Air disclaims any intention or obligation to update or revise any forward-looking statements it may make, whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

Discovery Air's shares and debentures trade on the Toronto Stock Exchange (Symbols DA.A and DA.DB respectively).


SOURCE Discovery Air Inc.

For further information:

Investor Relations 
Sheila Venman
Investor Relations
Sheila.venman@discoveryair.com
Toll Free (866) 903 3247

Rolf S. Dawson
Vice President, Corporate Finance & Administration
rolf.dawson@discoveryair.com
867-873-5350, Ext. 304


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