Avcorp announces financial restructuring with Panta Holdings B.V.


    Common Stock Listed
    Trading Symbol: AVP

    VANCOUVER, June 15 /CNW/ - Avcorp Industries Inc. ("Avcorp" or the
"Company") (TSX:AVP) today announced that it has entered into an investment
agreement with Panta Holdings B.V. ("Panta") of the Netherlands providing for
a private placement to Panta of 50,000,000 shares of the Company at a price of
Cdn.$0.10 per share for total gross proceeds of $5,000,000 and the issuance of
a three-year 8% convertible debenture having an aggregate principal amount of
Cdn.$2,500,000 convertible into common shares at a conversion price of
Cdn.$0.10 per share (the "Offering"). Panta has agreed that interest on the
convertible debenture will be deferred for 24 months and that the accumulated
interest will be added to the then outstanding principal amount and similarly
convertible into shares at Cdn.$0.10 per share. Approximately Cdn.$1,600,000
of the proceeds of the offering will be utilized to retire an interim loan to
be provided by Panta to Avcorp upon their entry into the investment agreement.
In aggregate, assuming conversion of the convertible debenture, the Offering
results in 79,000,000 common shares being issued or made issuable representing
approximately 245% of the currently outstanding common shares. Upon completion
of the Offering, Panta will immediately own approximately 61% of the then
outstanding shares of the Company, representing a change in control pursuant
to the policies of Toronto Stock Exchange ("TSX").
    Avcorp has determined to proceed with the Offering with Panta in response
to the global economic downturn, and in particular the rapid contraction in
the demand for manufactured commercial, business and military aircraft parts
from Avcorp's customers, who include The Boeing Company, The Cessna Aircraft
Company, Aviation Partners Boeing and Bombardier Aerospace. This shrinking
demand for these customer products has in turn resulted in a significant
decline in the orders for manufactured parts produced by the Company.
Management of the Company believes that the long term prospects for the
Company are reasonable as a result of certain anticipated projects which will
increase revenue in 2010 sufficient to sustain operations. The current
financial circumstances of the Company are described in detail in the
Company's press release of May 15, 2009.
    As a result of the financial situation described above, the Company,
through its management, reviewed the cash requirements for 2009 and determined
that the Company will require an immediate cash infusion in order to
adequately sustain itself as a going concern until such time as its operating
revenues supplant the requirement for outside debt and/or equity financing.
    The Company deems it to be in its best interest to complete the financial
restructuring with Panta owing to the enhanced prospect for long term
financial viability offered by Panta. No insiders of the Company are
participating in the Panta financial restructuring.
    Panta is a private investment vehicle, the principal of which is Mr. Jaap
Rosen Jacobson. Mr. Jacobson, through Panta, was formerly the principal of VLM
Airlines, a regional airline based in Europe, and has extensive knowledge of
the manufacturing business and aircraft industry. In view of Panta's industry
experience, management believes that the proposed investment by Panta will
contribute to the long term viability of the Company in addition to addressing
its immediate liquidity requirements.
    The proposal by Panta was considered by a Special Committee of the Board
of Directors. The Special Committee received advice from TD Securities Inc. as
financial advisor. The Special Committee was comprised of Mr. David Levi, Mr.
Earnest Beaudin and Ms. Liz Otis. However, Mr. Beaudin resigned from the
Company's Board of Directors on June 12, 2009 and Mr. Levi resigned from
Special Committee duties to avoid any perception of conflict of interest.
    In advance of closing the proposed transactions, Panta has agreed to
advance an interim loan of approximately CDN$1.6 million to address certain
immediate liquidity concerns. This loan will be advanced on or about June 16,
2009 and will be secured as a charge subordinate to all existing encumbrances.
Part of the proceeds of the Offering will retire this loan. The convertible
debenture under the Offering will be secured subordinate to existing senior
secured indebtedness of the Company
    The completion of the Offering is subject to a number of conditions
including financial due diligence, required third party approvals and final
TSX approval. Deferral of dividend payments on the Company's outstanding
Series A preferred shares until 2011 is also a condition, with respect to
which the Board of Directors resolved to make such deferral in accepting the
arrangements with Panta.
    Pursuant to the policies of the TSX, the Company is required to obtain
shareholder approval for an issuance of listed securities in excess of 25% of
the current issued and outstanding share capital of the Company. Further, the
Company is also required to obtain shareholder approval of the Offering based
on the material effect on control since the proposed transaction will result
in Panta holding approximately 61% of the issued and outstanding shares of the
Company following completion of the private placement. There are currently
32,314,929 shares of the Company issued and outstanding.
    However, Section 604(e) of the TSX Company Manual contains an exemption
from the requirement to obtain shareholder approval if a listed issuer is in
financial hardship. To rely on this exemption the listed issuer must make
specific application to the TSX for this exemption.
    Accordingly, Avcorp will apply to the TSX under the provisions of Section
604(e) of the TSX Company Manual, on the basis of the Company's financial
hardship, for an exemption from the securityholder approval requirements for
the transactions contemplated by the Panta investment agreement. The
application to the TSX will be made upon the recommendation of a Special
Committee of the Board of Directors of the Company, the sole member of which
is free from any conflict of interest with respect to the Panta agreement, and
who has concluded that this transaction is reasonable for the Company in the
    There are no assurances that the TSX will accept the application for the
use of the financial hardship exemption. The TSX has advised the Company that,
if approved by the TSX, its reliance on Section 604(e) of the TSX Company
Manual for an exemption from securityholder approval requirements in
connection with the Offering will result in the initiation of a de-listing
review by the TSX as is customary in such circumstances. The Company believes
that, following completion of the Offering, it will be in compliance with TSX
listing requirements.

    Changes to the Board of Directors

    The Company also announced the resignations of both Michael C. Scholz and
Earnest C. Beaudin from the Board of Directors of the Company. Mr. David Levi
has been appointed Chairman of the Board and Mr. Eric Frank Kohn has been
appointed Chairman of the Audit Committee. The Company wishes to thank both
Mr. Scholz and Mr. Beaudin for their contributions to the Company.
    Following the closing of the transactions with Panta, Panta will have the
right to a nominee on the Board of Directors.
    This news release does not constitute an offer to sell or a solicitation
of an offer to buy any of the shares in the United States. The shares have not
been and will not be registered under the United States Securities Act of
1933, as amended (the "U.S. Securities Act") or any state securities laws and
may not be offered or sold within the United States to U.S. persons unless
registered under the U.S. Securities Act and applicable state securities laws
or an exemption from such registration is available.
    Any securities issued in connection with the Offering will be subject to
a restriction from resale for a period of four months and one day from the
date of issue in accordance with applicable Canadian securities laws.

    About Avcorp

    Avcorp designs and builds major airframe structures for some of the
world's leading aircraft companies, including Boeing, Bombardier, and Cessna.
With more than 50 years of experience, approximately 500 skilled employees and
354,000 square feet of facilities, Avcorp offers integrated composite and
metallic aircraft structures to aircraft manufacturers, a distinct advantage
in the pursuit of contracts for new aircraft designs, which require
lower-cost, light-weight, strong, reliable structures.

    "Marcus Van Rooij"


    Forward-Looking Statements

    Certain statements in this release and other oral and written statements
made by the Company from time to time are forward-looking statements,
including those that discuss strategies, goals, outlook or other
non-historical matters; or projected revenues, income, returns or other
financial measures. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially from those
contained in the statements, including the following: (a) the extent to which
the Company is able to achieve savings from its restructuring plans; (b)
uncertainty in estimating the amount and timing of restructuring charges and
related costs; (c) changes in worldwide economic and political conditions that
impact interest and foreign exchange rates; (d) the occurrence of work
stoppages and strikes at key facilities of the Company or the Company's
customers or suppliers; (e) government funding and program approvals affecting
products being developed or sold under government programs; (f) cost and
delivery performance under various program and development contracts; (g) the
adequacy of cost estimates for various customer care programs including
servicing warranties; (h) the ability to control costs and successful
implementation of various cost reduction programs; (i) the timing of
certifications of new aircraft products; (j) the occurrence of further
downturns in customer markets to which the Company products are sold or
supplied or where the Company offers financing; (k) changes in aircraft
delivery schedules or cancellation of orders; (l) the Company's ability to
offset, through cost reductions, raw material price increases and pricing
pressure brought by original equipment manufacturer customers; (m) the
availability and cost of insurance; (n) the Company's ability to maintain
portfolio credit quality; (o) the Company's access to debt financing at
competitive rates; and (p) uncertainty in estimating contingent liabilities
and establishing reserves tailored to address such contingencies.

For further information:

For further information: Sandi DiPrimo, Investor Relations Contact,
(604) 587-4938

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