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Fairfax involved in MegaBrands recapitalization


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The company will get immediate capital through a US$100-million bought-deal financing led by GMP Securities and conduct a US$121-million private placement to a group made up of Fairfax Financial Holdings Ltd., some Trimark mutual funds and Victor Bertrand Sr., Mega Brands’ chairman, Vic Bertrand, its chief innovation officer, and Marc Bertrand.


Mega Brands has also committed to a US$50-million asset-based facility from Wachovia Capital Finance Corp. The company is also issuing US$35.9-million worth of common shares at 50¢ a share to the secured debtholders.


If approved, the transactions are expected to close by the end of March. The company should then carry about US$131-million in debt, with annual interest expenses reduced to US$13-million from the current US$43-million. In addition to cutting annual interest payments, the plan will provide $45-million in credit to help fund product lines in 2010.




According to this 2nd article, Fairfax now owns 20% of MegaBrands.




"Fairfax will be the largest shareholder, holding 20 per cent of shares, followed by Trimark mutual funds at 15 per cent and the Bertrand's at eight per cent, down from 11 per cent currently."



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Additional details:


8-11-08 Original investment:

FFH buys MB convertible debt Cdn $64 million, 8%, convertible into 20,064,000 common shares or 35.4% of MB at a conversion price of Cdn $3.19.


1-14-10 MB Capital Structure Restructuring (See attached .pdf for all details from MB website)


Key details as it relates to FFH after recapitalization:

+ FFH will choose three board members as a rep. of holders of Debentures


+ FFH CDN$64 million convertible debt cancelled for:

 a. CDN$6.5 million 10% interest 5yr debt (105% early purchase option subject to conditions)

 b. 13.058 million common shares

 c. 13.058 million warrants (1 common share at CDN$0.50)


+ CDN$50 million additional capital injection for:

 a. CDN$25.8 million 10% interest 5yr debt (105% early purchase option subject to conditions)

 b. 51.61 million common shares

 c. 51.61 million warrants (1 common share at CDN$0.50)


+ Own an additional CDN$2 million common shares & 2 million warrants that I can't account for.



+ FFH will own 64.6 million common shares = 20.2% outstanding common shares (non-diluted basis)

+ FFH will own 64.6 million warrants (1 common share at CDN$0.50)

+ FFH will own $32 million principal amount of 10% 5yr debts = 24% of outstanding principal amnt

+ FFH total capital injection CDN$115 million = CDN$64 million in 2008 and CDN$51 million in 2010

+ FFH has been paid 8% interest for about a year on the original convertible debentures



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