Magellan Aerospace Corporation announces closing of financing and repayment of convertible debentures on maturity



    TORONTO, Jan. 31 /CNW/ - Magellan Aerospace Corporation ("Magellan" or
the "Corporation") announced the closing of the private placement of an
aggregate of $20.95 million principal amount 8.5% convertible unsecured
subordinated debentures due January 31, 2010 (the "New Debentures") the
proceeds of which were used to fund, in part, the repayment of the
approximately $70 million principal amount of outstanding 8.5% unsecured
subordinated debentures (the "Existing Debentures") which matured today.
    The New Debentures are redeemable by Magellan for the first six months of
the term at 102.5% of principal value and the holders have no conversion
rights. After the first six months of the term, the New Debentures are
convertible, at the option of the holder, at any time prior to maturity into
common shares of Magellan at a conversion price of $2.00 per share, which is
equal to a conversion rate of 500 common shares per $1,000 principal amount of
debentures or the issuance on conversion of approximately 10,475,000 common
shares in total. Magellan's principal shareholder, N. Murray Edwards of
Calgary, Alberta, acquired $17.5 million principal amount of the debentures.
Mr. Edwards indicated the acquisition of the debentures is for investment
purposes and Mr. Edwards may, directly or indirectly acquire additional
securities of Magellan depending on market conditions. If the debentures were
converted, Mr. Edwards would acquire an additional 8,750,000 common shares
representing an additional 8.6% of the issued and outstanding common shares of
Magellan after conversion of all of the debentures. Mr. Edwards currently
owns, directly or indirectly, 25,284,893 common shares (approximately 27.8% of
the issued common shares of Magellan) and 1,005,000 First Preferred Shares
which are convertible into common shares of Magellan at $3.00 per share.
Another director of the Corporation acquired $650,000 principal amount of the
New Debentures and the remaining $2.8 million principal amount of the New
Debentures was placed with other investors.
    In order to fund the remaining balance of approximately $50 million on
the maturity of the Existing Debentures, Edco Capital Corporation ("ECC"), a
corporation controlled by Mr. Edwards, has provided a loan of $50 million (the
"Original Loan") and a $15 million bridge loan (the "Bridge Loan") to the
Corporation. All of the funds from the Bridge Loan and approximately
$35 million of the funds from the Original Loan were used to repay the balance
of the Existing Debentures and the $15 million additional funds from the
Original Loan was provided to the Corporation to retire $15 million of
subordinated debt due to a company with a common director, who is also the
owner of all of the shares of such lender. Both the Original Loan and the
Bridge Loan bear interest at a rate of 10% per annum calculated and payable
monthly and are collateralized and subordinated to the Corporation's existing
bank credit facility. The Original Loan is repayable on July 1, 2009 and the
Bridge Loan is repayable on July 31, 2008. In consideration for the provision
of additional security for the Corporation's obligations under its existing
secured credit facility, the Corporation has increased the standby guarantee
payable to Mr. Edwards from 0.1% per annum to 1% per annum of the principal
amount guaranteed.

    Magellan Aerospace Corporation is one of the world's most integrated and
comprehensive aerospace industry suppliers. Magellan designs, engineers, and
manufactures aeroengine and aerostructure assemblies and components for
aerospace markets, advanced products for military and space markets, and
complementary specialty products. Magellan is a public company whose shares
trade on the Toronto Stock Exchange (TSX: MAL), with operating units
throughout Canada, the United States and the United Kingdom.

    Forward Looking Statements:

    This press release contains information and statements of a
forward-looking nature concerning the plans of the Corporation in relation to
financing the repayment of its existing 8.5% Unsecured Subordinated
Convertible Debentures. These statements are based on assumptions and
uncertainties, including regulatory approvals and marketing of the securities,
as well as on management's reasonable evaluation of future events. These
statements are not guarantees of future performance and involve risks and
uncertainties that are difficult to predict, and/or are beyond the
Corporation's control. A number of important factors could cause actual
outcomes and results to differ materially from those expressed in these
forward-looking statements.

    %SEDAR: 00002367E




For further information:

For further information: John B. Dekker, Vice President Finance &
Corporate Secretary, (905) 677-1889 ext. 224, E: john.dekker@magellan.aero


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