SOF Investments, L.P. - Primary Energy Recycling Corporation - Early Warning

TORONTO, Oct. 14 /CNW/ - On August 24, 2009, Primary Energy Recycling Corporation (TSX: PRI.UN) (the "Company") announced that it had completed a recapitalization transaction (the "Recapitalization") under a plan of arrangement under the Business Corporations Act (British Columbia) pursuant to which all of the Company's outstanding 11.75% subordinated notes (the "Subordinated Notes") were converted into common shares of the Company ("Existing Common Shares") on the basis of sixteen (16) Existing Common Shares for every Cdn$2.50 principal amount of Subordinated Notes (being Cdn.$0.156 principal amount per Existing Common Share) and all of the outstanding Existing Common Shares (including those issued on the conversion) were consolidated on the basis of one (1) new common share of the Company (a "New Common Share") for every seventeen (17) Existing Common Shares. As a result of the Recapitalization, SOF Investments, L.P. ("SOF Investments"), which previously held 325,800 Existing Common Shares (representing approximately 1.0% of the Existing Common Shares outstanding prior to the Recapitalization) and Cdn$13,314,500 principal amount of Subordinated Notes, received 85,212,800 Existing Common Shares in exchange for such Subordinated Notes and now holds 5,031,682 New Common Shares, corresponding to approximately 13.25% of the outstanding New Common Shares (based on there being approximately 37,964,706 New Common Shares outstanding post Recapitalization, as disclosed by the Company). The acquisition resulted from the Recapitalization and no consideration was paid by SOF Investments for the exchange.

On October 1, 2009, the Company announced the filing of a (final) prospectus (the "Prospectus") in respect of a US$50 million rights offering to all shareholders resident in Canada and the United States (the "Rights Offering"). Shareholders of record resident in Canada and the United States as of the close of business on October 13, 2009 (the "Record Date") received one right (a "Right") for each New Common Share held. Each Right entitles the holder thereof to acquire 2.532717 New Common Share subscription receipts ("Subscription Receipts") at a subscription price of US$0.52 per Subscription Receipt. On the date of the closing of the refinancing of the Company's US$131 million term loan (the "Refinancing"), each Subscription Receipt will be automatically exchanged for one New Common Share. Subscription funds will be returned to investors if the Company does not close the Refinancing on or before February 23, 2010, and in certain other limited circumstances as described in the Prospectus.

As a result, on the Record Date, SOF Investments received 5,031,682 Rights and is deemed to beneficially own the 12,743,826 Subscription Receipts issuable upon exercise of such Rights. Assuming the closing of the Refinancing occurs and no Rights are exercised other than those issued to SOF Investments, SOF Investments would beneficially own approximately 17,775,508 New Common Shares, corresponding to approximately 35.05% of the outstanding New Common Shares (based on there being 50,708,532 New Common Shares outstanding assuming only SOF Investments exercised its Rights).

It should be noted, however, that SOF Investments is one of the shareholders that has entered into a standby commitment for the Rights Offering, with SOF Investments' proposed commitment being US$25 million. The standby commitment is subject to certain conditions. If no other shareholders exercise Rights and SOF Investments and the other standby purchasers acquire all of the Subscription Receipts issuable pursuant to the Rights Offering, following the completion of the Rights Offering and the exchange of the Subscription Receipts for New Common Shares, SOF Investments would beneficially own or exercise control and direction over approximately 39.6% of the outstanding New Common Shares. Based on disclosure contained in the Prospectus, it is anticipated that other holders of Rights may exercise the Rights such that this percentage may be lower once the Rights Offering closes.

SOF Investments does not own or control any other New Common Shares. SOF Investments may acquire, or acquire control or direction over, additional common shares of the Company or dispose of its existing New Common Shares on the basis of its assessment of market conditions and in compliance with all applicable contractual and securities regulatory requirements.


For further information: For further information: or to obtain a copy of the Early Warning Report filed with this press release: SOF Investments, L.P., 645 Fifth Avenue, 21st Floor, New York, New York, 10022, Tel: (212) 303-1650, Attention: Marc R. Lisker

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