MONTREAL, March 26, 2013 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) (the
"Corporation") announced today that it intends to reduce the outstanding principal
amount of its debentures by CA$62.4 million using proceeds from the
exercise of warrants together with a scheduled repayment. As a result,
the Corporation's pre-tax cash interest expense will be reduced by
approximately CA$6.2 million annually, representing CA$0.22 per diluted
common share on a pre-tax basis, assuming exercise of warrants by the
warrantholders named herein, and on the assumptions set forth below.
The principal amount of debentures outstanding will be reduced to
CA$52.2 million, compared to CA$141.7 million as at March 30, 2010 when
they were issued.
The Corporation today confirmed that it has received or has commitments
to receive in the coming days an aggregate of CA$55.3 million of
proceeds from the exercise of outstanding common share purchase
warrants (the "Warrants") issued pursuant to a warrant indenture dated January 28, 2010 (the "Warrant Indenture"). As permitted under the terms of the debenture indenture dated
January 28, 2010 governing its 10% senior secured debentures (the "Debentures"), these proceeds will be used to purchase CA$55.3 million in principal amount of Debentures on a pro rata basis at a purchase
price equal to 100% of the principal amount of Debentures, plus accrued
and unpaid interest thereon and, together with scheduled repayments of
Debentures of CA$7.1 million on March 30th, will reduce the principal
amount of Debentures outstanding by CA$62.4 million, to CA$52.2
million. The Corporation plans to give formal notice to the holders of
Debentures informing them of the upcoming purchase and expects to
complete the purchase of Debentures by April 15, 2013.
"This significant debt reduction strengthens our financial position and
will contribute directly to net earnings through lower interest
expenses beginning in the second quarter of this year," said Marc
Bertrand, the Corporation's President and Chief Executive Officer.
The Corporation also announced today that it plans to offer to the
holders of Warrants the right to submit their Warrants for the exercise
of the subscription right thereof for common shares on a cashless basis
on the terms and conditions to be set forth in an offer letter to
warrantholders (the "Offer Letter") and in the cashless exercise election form to be transmitted
therewith (such exercise, a "Cashless Exercise" and such offer, the "Offer").
The Offer will expire at 5:00 p.m. (Eastern Time) on the date which is
35 days after the Offer is made (as such time may be extended in
accordance with the terms of the Offer Letter, the "Expiration Time"). Warrants may not be submitted for Cashless Exercise pursuant to the
Offer after the Expiration Time.
If the conditions to the Offer described in the Offer Letter are
satisfied or waived, then each Warrant properly submitted to the
warrant agent pursuant to the Offer will be accepted for Cashless
Exercise on the date on which any such Warrants are received by the
warrant agent (each such date a "Cashless Exercise Date"), and the holder thereof will thereupon be entitled to receive the
number of common shares described in the Offer Letter.
In order to facilitate the making of the Offer and reduce the
Corporation's long-term debt, each of Fairfax Financial Holdings Ltd.
("Fairfax") and Victor J. Bertrand, Sr. ("Mr. Bertrand") have agreed to exercise the full amount of Warrants they hold and
Trimark Investments ("Trimark") has agreed to exercise 33,978,000 of the Warrants it holds (such
exercises collectively representing 45% of all outstanding Warrants),
resulting in a total of CA$53.3 million of proceeds to the Corporation,
in addition to the CA$2.0 million of warrant exercise proceeds the
Corporation has already received over recent months, all of which will
be used in connection with the purchase of Debentures referred to
The Corporation has also entered into a support agreement with each of
Trimark, Lissom Investment Management ("Lissom"), Chiefswood Holdings Ltd. ("Chiefswood") and Chou Associates Management Inc. ("Chou"), which beneficially own in aggregate approximately 17% of the
Warrants (after giving effect to the Warrant exercise referenced
above), and which have agreed to submit all of their Warrants then held
for Cashless Exercise pursuant to the Offer.
To submit Warrants for Cashless Exercise pursuant to the Offer, the
holder of such Warrants must, on or prior to the Expiration Time,
comply with the procedures described in the Offer Letter. Any
submission of Warrants for Cashless Exercise pursuant to the Offer will
be irrevocable and may not be withdrawn.
Under the current terms of the Warrant Indenture, exercising 20 Warrants
together with the payment of the current exercise price of CA$9.94
entitles warrantholders to receive one common share of the Corporation.
In connection with the Offer, amendments ("Amendments") will be made to the Warrant Indenture to permit the Corporation to
effect the Offer and other cashless exercise offers from time to time
on terms that are consistent with the rules of the Toronto Stock
Exchange. The Amendments will be effective as of April 5, 2013. The
Corporation also expects to commence the Offer on April 5, 2013. During
the offer period determined by the Corporation and specified in the
Offer, warrantholders will be provided with the choice to elect to
exercise their Warrants on a cashless basis.
Warrantholders may at all times continue to exercise their Warrants and
pay the CA$9.94 exercise price or, alternatively, after such date and
during the offer period determined by the Corporation and specified in
the Offer, they may exercise their Warrants on a cashless basis and
receive the number of common shares of the Corporation they are
entitled to under a Cashless Exercise.
In connection with a Cashless Exercise of Warrants pursuant to the
Offer, the holder of such Warrants (1) will not be required to pay the
exercise price in cash and (2) will, in lieu of receiving the number of
common shares that such holder would otherwise have received under the
Warrant Indenture upon the exercise of the subscription right
thereunder, receive the number of common shares (rounded down to the
nearest whole number) that is equal to the quotient obtained by
dividing (A) (i) one twentieth of the number of such Warrants
multiplied by the market price of the common shares on the Cashless
Exercise Date minus (ii) one twentieth of the number of such Warrants
multiplied by the Warrant exercise price on the Cashless Exercise Date,
by (B) the market price of the common shares on the Cashless Exercise
For the purposes of the above formula, "market price" means the volume
weighted average trading price ("VWAP") of the common shares on the Toronto Stock Exchange for the five
trading days immediately preceding the date on which any Cashless
Exercise occurs. In order to inform warrantholders of the daily market
price of the common shares applicable to a Cashless Exercise of the
Warrants, the Corporation intends to publish the five-day VWAP on its
website at www.megabrands.com beginning on April 5, 2013 and each subsequent trading day until the
The Offer and the Amendments have been approved by the board of
directors of the Corporation (Paul Rivett and Mr. Bertrand abstaining)
and will be completed pursuant to an exemption from the minority
approval requirements of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions pursuant to Section 5.7(a) thereof.
As at March 25, 2013, Fairfax held 3,704,337 (22.3%) common shares, 56,408,000
(23.5%) Warrants, and CA$15,481,996 (13.5%) aggregate principal amount
of Debentures. Following its exercise of Warrants, Fairfax will hold
6,524,737 (29.2%) common shares, no Warrants, and the same amount and
proportion of Debentures.
As at March 25, 2013, Trimark held 2,371,246 (14.3%) common shares,
37,304,000 (15.6%) Warrants, and CA$17,638,434 (15.4%) aggregate
principal amount of Debentures. Following its exercise of Warrants,
Trimark will hold 4,116,662 (18.4%) common shares, no Warrants and the same amount and proportion of
As at March 25, 2013, Mr. Bertrand held 1,466,285 (8.8%) common shares,
16,910,000 (7.1%) Warrants, and CA$7,962,788 (6.9%) aggregate principal
amount of Debentures. Following his exercise of Warrants, he will hold
2,311,785 (10.4%) common shares, no Warrants, and the same amount and
proportion of Debentures.
The percentage of common share ownership figures in the three foregoing
paragraphs give effect to the cash and cashless exercises by Fairfax,
Mr. Bertrand, Trimark, Lissom, Chiefswood and Chou, in the case of any
Cashless Exercise of Warrants assuming for illustrative purposes that
the market price of the Corporation's common shares at the time of any
such Cashless Exercise is equal to the closing price of the common
shares on March 25, 2013, and assuming no other Cashless Exercises.
GMP Securities L.P. acted as exclusive financial advisor to the
Corporation in connection with the Offer.
Registered holders of Warrants that wish to submit their Warrants for
Cashless Exercise pursuant to the Offer must ensure that all
requirements for such submission have been satisfied on or prior to the
Beneficial owners of Warrants, whose Warrants are registered in the name
of a brokerage firm, bank or trust company or other intermediary,
should promptly contact their intermediaries and obtain and follow
their intermediaries' instructions with respect to the applicable
submission procedures and deadlines, which may be earlier than the
deadlines that are described above and set out in the Offer Letter.
If you have any questions or require assistance with the Cashless
Exercise of your Warrants, or if you wish to obtain a copy of the Offer
Letter and the cashless exercise election form transmitted therewith,
CST Phoenix Advisors
North American Toll Free Phone: 1-800-398-1272
Banks, Brokers and collect calls: 201-806-2222
Toll Free Facsimile: 1-888-509-5907
The preceding statements are only a summary of certain provisions of the
Offer Letter, cashless exercise election form transmitted therewith,
Warrant Indenture and related amendments, and are qualified in their
entirety by the full text of each, copies of which will be made
available electronically under the System for Electronic Document
Analysis and Retrieval (SEDAR) System (www.sedar.com).
The Offer will not be made to, and cashless exercise election forms will
not be accepted from or on behalf of, warrantholders in any
jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction.
About MEGA Brands Inc.
MEGA Brands Inc. 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. Visit http://www.megabrands.com for more information.
The MEGA logo, Mega Bloks, Rose Art, MEGA Puzzles, MEGA Games and Board
Dudes are trademarks of MEGA Brands Inc. or its affiliates.
All statements in this press release that do not directly and
exclusively relate to historical facts constitute "forward-looking
information" within the meaning of applicable Canadian securities laws
These statements represent the Corporation's intentions, plans,
expectations and beliefs. Readers are cautioned not to place undue
reliance on these forward-looking statements. Forward-looking
information and statements are based on a number of assumptions and
involve risks, uncertainties and other factors that could cause actual
results to differ materially from those expressed or implied by them,
including, but not limited to risks, assumptions and uncertainties
described in the Corporation's MD&A for the year ended December 31,
2012, which are available at www.sedar.com and on the Corporation's Web site. The Corporation disclaims any
intention or obligation to publicly update or revise any
forward-looking information, whether as a result of new information,
future events or otherwise, other than as required by applicable law.
SOURCE: MEGA BRANDS INC.
For further information:
Vice-President and Chief Financial Officer
Tel: (514) 333-5555 ext. 2283
Vice-President, General Counsel and Corporate Secretary
Tel: (514) 333-5555 ext. 2897