MEGA Brands announces amendments to its credit facilities and the closing of a CA$75 million private placement



    MONTREAL, Aug. 18 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) (the
"Corporation") is pleased to announce today that it has received lender
approval for certain amendments to its senior secured credit facilities (the
"Credit Facilities") maturing in 2012 (the "Credit Agreement").
    On August 18, 2008, the Corporation executed a sixth amending agreement
(the "Sixth Amendment") to its Credit Agreement dated July 26, 2005 providing
for certain changes to the terms and conditions of its senior secured Credit
Facilities maturing in 2012, including a waiver of the cumulative minimum
EBIDTA ratio covenant for the period ended June 30, 2008. Additionally, the
Sixth Amendment introduces the concept of a new definition of the calculation
of EBIDTA allowing for the add-back of certain non-recurring and non-cash
items. The covenant includes a minimum EBITDA at the end of each quarter up to
and including June 30, 2010, at which point more stringent covenants
previously in place under the Credit Agreement become effective. The revolving
credit facility has been reduced to $100 million.
    Concurrently, the Corporation has closed the private placement offering
of senior unsecured convertible debentures with Fairfax Financial Holdings
Ltd. ("Fairfax"), Chiefswood Holdings Limited ("Chiefswood"), The Owners Fund
and Victor J. Bertrand Sr., the founder and chairman of the board of directors
of the Corporation, announced on August 11, 2008, which will generate gross
proceeds of CA$75 million and mature on August 31, 2013.
    As announced, the debentures will bear interest at a rate of 8% payable
semi-annually in arrears and will be convertible at the option of the holder
at any time prior to the maturity date based on a conversion price equal to
approximately CA$3.19 per common share, subject to customary anti-dilution
adjustments. The debentures will be convertible into 23,512,500 common shares,
representing 39% of the common shares of the Corporation on an as converted
basis.
    Assuming full conversion of the debentures to be issued to them, Fairfax
would hold 20,064,000 common shares or 35.4% of the outstanding shares of the
Corporation and such a conversion may have a material effect on control,
Victor J. Bertrand Sr. would hold an additional 2,194,500 common shares which,
with his current holding, will represent 11% of the outstanding shares of the
Corporation and each of Chiefswood and The Owner Group would receive
627,000 common shares which represent approximately 1 % of the outstanding
shares of the Corporation. See the Corporation's press release dated
August 11, 2008 for further details.
    BMO Capital Markets acted as exclusive placement agent and financial
advisor to MEGA Brands in connection with the Offering.
    The proceeds of the offering, combined with the amendments to the
Corporation's Credit Facility, provide the Corporation with the financial
resources and flexibility to meet working capital requirements leading up to
the peak toy selling season and to continue the implementation of its Value
Enhancement Plan.

    About MEGA Brands

    MEGA Brands is a trusted family of leading global brands in construction
toys, games & puzzles, arts & crafts and stationery. They offer engaging
creative experiences for children and families through innovative,
well-designed, affordable and high-quality products that deliver on our
Creativity to the Rescue promise. Visit http://www.megabrands.com for more
information.
    The MEGA logo, Creativity to the Rescue, Mega Bloks, Rose Art, MagNext
and Board Dudes are trademarks of MEGA Brands Inc. or its affiliates.

    About Fairfax

    Fairfax Financial Holdings Limited is a financial services holding
company which, through its subsidiaries, is engaged in property and casualty
insurance and reinsurance and investment management.

    Forward-Looking Statements

    All statements in this press release that do not directly and exclusively
relate to historical facts constitute "forward-looking statements". These
statements represent the Corporation's intentions, plans, expectations and
beliefs. In certain instances, these statements require us to make assumptions
and there is significant risk that these assumptions may not be correct.
Furthermore, these statements are subject to risks, uncertainties and other
factors, many of which are beyond the Corporation's control. The Corporation
disclaims any intention or obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, other than as required by applicable legislation. Readers
are cautioned not to place undue reliance on these forward-looking statements.
More information about the risks that could cause our actual results to
significantly differ from our current expectations can be found in the "Risks
and Uncertainties" section of our 2007 annual MD&A and Q2 2008 MD&A.




For further information:

For further information: Analysts and Investors: Eric Phaneuf, (514)
333-5555 ext. 2538, ephaneuf@megabrands.com; Media: Harold Chizick, (514)
333-5555 ext. 2338, hchizick@megabrands.com


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