MEGA Brands accepts C$20 million of 10% debentures for purchase

By Angela McDaniels

Tacoma, Wash., May 13 - MEGA Brands Inc. said it accepted and purchased C$20 million principal amount of its outstanding 10% senior secured debentures through a debt substantial issuer bid, reducing its long-term term debt to about C$121.7 million.

Holders tendered C$34,178,000 principal amount of debentures in the offer, of which the company accepted 58.5%, according to a company news release.

The company paid 106% of par plus accrued interest.

As reported on May 6, the debentureholders passed an extraordinary resolution approving amendments to the indenture governing the debentures. The amendments allow, among other things, the company to increase available borrowings for working capital purposes under its asset-based credit agreement by an amount equal to 50% of the principal amount of debentures that it purchases, subject to a cap.

"This transaction reduces our debt by C$20 million and, combined with the amendments to the debenture indenture, allows us to increase our financial flexibility by aligning our capital structure more closely with the inherent seasonality of our business," chief financial officer Peter Ferrante said in Friday's new release. "As a result, our cost of capital will improve as we move towards more variable debt at more favorable interest rates."

MEGA Brands is a Montreal-based manufacturer of construction toys, games, puzzles, stationery and arts and crafts supplies.

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