Discovery Air announces $30 million public offering of convertible debentures and early redemption of existing convertible debentures

YELLOWKNIFE, April 21 /CNW/ – Discovery Air Inc. today announced that it has entered into an agreement with GMP Securities L.P. (the “Underwriter”) pursuant to which the Underwriter has agreed to purchase $30 million principal amount of convertible unsecured subordinated debentures (“Convertible Debentures”) at a price of $1,000 per debenture. Discovery Air has also granted the Underwriter an over-allotment option to purchase up to an additional $4.5 million aggregate principal amount of Convertible Debentures for a period of 30 days following closing to cover over-allotments and for market stabilization purposes.

The Convertible Debentures will mature on June 30, 2016 and will accrue interest at the rate of 8.375% per annum payable on a semi-annual basis. At the holder’s option, the Convertible Debentures may be converted into common shares in the capital of Discovery Air Inc. at any time up to the maturity date. The conversion price will be $0.73 for each common share, subject to adjustment in certain circumstances.

The Convertible Debentures will be direct, unsecured obligations of Discovery Air Inc., subordinated to other indebtedness of the company for borrowed money and ranking equally with all other unsecured subordinated indebtedness.

The Convertible Debentures will not be redeemable before June 30, 2014. From June 30, 2014 through the maturity date, Discovery Air may, at its option, redeem the Convertible Debentures, in whole or in part, at par plus accrued and unpaid interest provided that the weighted average trading price of the common shares on the Toronto Stock Exchange during a specified period prior to redemption is not less than 125% of the conversion price.

Subject to specified conditions, Discovery Air will have the right to repay the outstanding principal amount of the Convertible Debentures, on maturity or redemption, through the issuance of common shares of the company. Discovery Air also has the option to satisfy its obligation to pay interest through the issuance and sale of additional common shares of the company. Additionally, Discovery Air will have the option, subject to prior agreement of the holders, to settle its obligations on conversion by way of a cash payment of equal value.

Simultaneously with closing of the offering, Discovery Air has agreed to provide notice to Computershare Trust Company of Canada, as trustee under the trust indenture dated as of December 19, 2006 between Computershare and Discovery Air, that it will redeem all of the existing 8.75% convertible unsecured subordinated debentures (the “Existing Debentures”). Discovery Air will use the net proceeds of the offering to redeem all of the Existing Debentures, and the balance, if any, for working capital and general corporate purposes. A portion of the net proceeds from the sale of the Convertible Debentures will be deposited into escrow at closing of the offering in order to satisfy the redemption obligations of Discovery Air.

The offering is scheduled to close on or about May 12, 2011 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange.

A preliminary short-form prospectus will be filed with securities regulatory authorities in the provinces of Ontario, Manitoba, Saskatchewan, Alberta and British Columbia and the Northwest Territories. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction.