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Mega Brands sells shares for $75M

By Staff -- Gifts and Dec, 8/11/2008 9:19:00 AM

MONTREAL—Mega Brands has struck a deal for $75 million (Canadian) in funding through the private placement of senior unsecured convertible debentures. Proceeds from the move will be used for working capital and general corporate purposes.

According to the company's press release announcing the funding, a majority of Mega Brands' directors recommended the move due to their belief that "the Corporation is in serious financial difficulty due to inadequate liquidity in this period of high demand for working capital before the holiday season and their belief that the Offering will considerably improve the Corporation's financial situation."

Participating in the placement are Financial Holdings Ltd. (which is investing CAN$64 million), Chiefswood Holdings Ltd., The Owners Fund, and Victor J. Bertrand Sr., Mega Brands’ founder and chairman of the board of directors, who is investing CAN$7 million in the offering. The debentures mature on August 31, 2013.

"We are pleased to have a new investor with a record of creating shareholder value and corporate growth, and the continued support of Victor J. Bertrand Sr.," said Marc Bertrand, Mega Brands’ president and CEO. "This investment provides Mega Brands with additional liquidity to execute its business plan. In addition, we now have greater flexibility to complete the continuation of our Value Enhancement Plan."

Assuming full conversion of the debentures to be issued to it, Fairfax would hold 20,064,000 common shares, or 35.4 percent of the outstanding shares of the corporation. Following the closing of the offering—expected to occur by August 19—Fairfax will be entitled to nominate one person to Mega Brands’ board of directors.

Assuming full conversion of the debentures to be issued to him, Victor J. Bertrand Sr. would hold an additional 2,194,500 common shares which, with his current holding (4,415,711 shares), would represent 11 percent of the outstanding shares of the corporation.

Chiefswood and Owner each will obtain, upon full conversion of the debentures to be issued to them, 627,000 common shares, or approximately 1 percent of the outstanding shares of the corporation.

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