N@N

MEGA Brands Inc. Announces Debt Substantial Issuer Bid and Proposed Amendments to Debentures

^{Published on 2011-04-08 08:15:37 - Market Wire}
 

MONTREAL, April 8 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) ("MEGA Brands" or the "Corporation") announced today that the Toronto Stock Exchange (the "TSX") has accepted its Notice of Debt Substantial Issuer Bid to purchase up to $20,000,000 in principal amount of its issued and outstanding 10% senior secured debentures due March 31, 2015 (the "Debentures") at a price of $1,060.00 (plus any accrued but unpaid interest) per $1,000.00 principal amount of Debentures (the "Offer"). Currently there is $141,722,000 in principal amount of Debentures outstanding.

The Offer is being made through the facilities of the TSX and will be open for acceptance on May 13, 2011 from 10:00 a.m. EDT to 12:00 p.m. EDT. Holders of the Debentures ("Debentureholders") who wish to accept the Offer must ask their investment adviser, investment dealer, bank, trust company or other nominee to effect the transaction for them during such period.

Fairfax Financial Holdings has indicated its intention to tender to the Offer $20,000,000 in principal amount of the $28,204,000 in principal amount of Debentures that it currently holds. If greater than $20,000,000 in principal amount of Debentures are tendered to the Offer, the Corporation will purchase from each Debentureholder who has tendered to the offer a proportion of the principal amount of Debentures tendered by such Debentureholder, which proportion shall be equal to the fraction obtained by dividing $20,000,000 by the aggregate principal amount of all Debentures tendered to the Offer.

The Offer will provide liquidity to the Debentureholders. As further interest payments will not be required on those Debentures that are retired by the Corporation, this offer should also benefit shareholders of the Corporation. In addition, the management of the Corporation believes that retiring Debentures will allow for more efficient treasury management, while improving the Corporation's liquidity and its overall financial position.

A copy of the Notice of Debt Substantial Issuer Bid is available through GMP Securities, L.P., the dealer manager, by contacting Kim Ritchie at (416) 941-0804.

Proposed Amendments

The Corporation also announced today that it intends to seek the approval of the holders of Debentures, to amend the terms of the trust indenture governing the Debentures (the "Debenture Indenture") at a meeting of Debentureholders to be held on May 6, 2011 (the "Meeting"). The proposed amendments include amendments to (i) permit the Corporation and its subsidiaries to incur additional indebtedness under the Corporation's asset based credit agreement and additional revolving facilities up to an aggregate additional principal amount equal to 50% of the aggregate principal amount of Debentures that the Corporation purchases from time to time under the Debenture Indenture, provided that the aggregate principal amount of indebtedness under such asset based credit agreement may not exceed US$100 million at any time; (ii) provide the Corporation and its subsidiaries with an ability to dispose of Accounts (as such term is defined in the Debenture Indenture), the account debtors of which are located in Canada or the United States of America, subject to certain limitations on the amount of Accounts disposed of each year, and provide for the release of the security in favour of the Debentureholders over such Accounts in the event of any such disposition; (iii) increase the limit on acquisitions of real property from US$2,000,000 to US$5,000,000; and (iv) increase the amount of permitted investments from US$1,000,000 to US$5,000,000.

The Corporation expects that these amendments will provide it with increased flexibility, thus allowing it to align its capital structure more closely with the inherent seasonality of its business and the corresponding fluctuations in working capital requirements throughout the year.

The Corporation's board of directors has recommended that Debentureholders vote for the proposed amendments. In addition, Fairfax Financial Holdings Limited and directors and officers of the Corporation, who hold in the aggregate approximately 26% of the issued and outstanding Debentures, have indicated that they are in favour of the proposed amendments.

Further information with respect to the proposed amendments as well as voting instructions will be outlined in a management information circular (the "Circular") expected to be mailed to the Debentureholders around April 15, 2011.

For the amendments to be approved, at least 66 2/3% of the principal amount of the Debentures voted (either in person at the Meeting or by proxy) must be FOR votes and the Corporation must receive all other applicable regulatory or other consents. Debentureholders may vote FOR the proposed amendments either by: (1) voting in person at the Meeting or (2) submitting their proxy. Detailed voting instructions will be found in the Circular. The Meeting is scheduled to be held at the offices of Osler, Hoskin & Harcourt LLP, 1000 De La Gauchetière Street West, Suite 2100, Montreal, Quebec on May 6, 2011 at 10:00 a.m. (Eastern Standard Time).

About MEGA Brands

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 Games, MEGA Puzzles and Board Dudes are trademarks of MEGA Brands Inc. or its affiliates.

Forward-Looking Statements

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, 2010, which is available at [ www.sedar.com ]. 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.