Melcor Developments Ltd.
TSX : MRD

January 21, 2011 18:42 ET

Melcor Developments Ltd. Announces Proposed Private Placement Convertible Debenture to Facilitate Its Growing Business

EDMONTON, ALBERTA--(Marketwire - Jan. 21, 2011) - Melcor Developments Ltd. ("Melcor" or the "Company")) (TSX:MRD) is pleased to announce that it intends to complete a non-brokered private placement with Melton Holdings Ltd. ("Melton"), KingSett Canadian Real Estate Income Fund LP and Cavell Holdings Inc. ("Cavell"), of $40,000,000 aggregate principal amount of 6.25% convertible unsecured subordinated debentures ("Debentures") (the "Private Placement"). The expected closing date of the Private Placement is February 8, 2011 ("Closing Date"), and the Company intends to use the net proceeds from the Private Placement for general corporate purposes. Completion of the Private Placement is subject to the satisfaction of certain conditions, including approval of the Private Placement by the Toronto Stock Exchange.

The Debentures bear interest at a rate of 6.25% per annum, calculated from and after their date of issue, to be paid quarterly in arrears, with the first interest payment to fall due on March 31 2011, and have a maturity date that is to be seventy two months from their date of issue ("Maturity Date"). Furthermore, the Debentures are convertible, in whole or in part, at the option of the holder at any time prior to the close of business on the earlier of the Maturity Date and the business day immediately preceding the date specified by the Company for redemption of the Debentures into common voting shares of the Company ("Common Shares") at a conversion price of $18.51 per Common Share ("Conversion Price"), being a conversion rate of 54.02 Common Shares for each $1,000 principal amount of Debentures, subject to adjustment in accordance with the terms of the Debentures.

Further, commencing on February 1, 2014 and up to and including January 31, 2016 the Company will have the option of redeeming the Debentures at a price equal to their principal amount, plus any accrued and unpaid interest thereon, provided that the volume weighted average trading price of the Common Shares on the Toronto Stock Exchange for the 20 consecutive trading days, ending 5 trading days preceding the date on which notice of redemption is given, is at least 125% of the Conversion Price. Commencing on February 1, 2016, the Company will have the option of redeeming the Debentures at a price equal to their principal amount plus any accrued and unpaid interest thereon. 

Both Melton and Cavell are related parties to Melcor by virtue of a commonality of certain directors, officers and/or shareholders, and, accordingly, the Private Placement constitutes a "related party transaction" within the meaning of applicable securities laws. Due to the size of the Private Placement relative to the Company's market capitalization, the Company is exempt from the formal valuation and minority shareholder approval requirements that generally apply to related party transactions under applicable securities laws.

A special committee ("Special Committee") of independent directors of the Company was struck to oversee the negotiation of the terms of the Private Placement and to make a recommendation with respect thereto to the board of directors ("Board"). The Special Committee retained Desjardins Securities Inc. ("Desjardins") as its financial advisor and Desjardins provided its opinion to the Special Committee that the terms of the Private Placement are fair, from a financial point of view, to the Company. Based on a number of considerations, including the Desjardins fairness opinion, the Special Committee unanimously determined that the Private Placement is in the best interests of the Company and recommended that the Board approve the Private Placement. The Board, having received the Special Committee's recommendation, unanimously approved the Private Placement.

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") stipulates that, in the context of a related party transaction, if a material change report is filed less than 21 days before the expected date of the closing the transaction, an explanation is to be provided why the shorter period is reasonable or necessary in the circumstances. The Company's management and the Board believe that, due to the nature of the transaction, the relationship amongst the parties and the small number of parties involved, the negotiation and preparation of the legal documentation and the obtaining of any necessary approvals should proceed quite quickly; accordingly, the Board and management believe that, notwithstanding the proposed closing date of February 8, 2011, that it is reasonable that this press release be filed as of today's date.

Melcor Developments Ltd. is a publicly traded Edmonton based real estate development company tracing its roots back to 1923. Melcor develops master planned residential communities, office and retail properties, and owns and manages commercial and golf course assets in western Canada and in the southwestern United States. Melcor is pleased to participate with KingSett, Melton Holdings and Cavell Holdings in this financing arrangement to assist in its continuing growth.

KingSett Capital is Canada's leading private equity real estate investment business co-investing with pension funds and high net worth individuals in its growth funds, mortgage fund and income fund. KingSett Capital seeks investments with premium risk weighted returns and, on behalf of KingSett Canadian Real Estate Income Fund LP, is pleased to join the Melton family in making this strategic investment in Melcor, a western Canadian icon. For more information, see www.kingsettcapital.com.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction.

This press release may contain forward looking statements, being statements which are not historical in fact, including, without limitation, statements regarding anticipated results, revenues, costs or discussions of future plans and objectives. There can be no assurance that such statements will prove accurate. Such statements are necessarily based upon a number of estimates and assumptions that are subject to numerous risks and uncertainties that could cause actual results to differ materially from those anticipated or projected.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Melcor Developments Ltd. - Business Contact
    Ralph B. Young
    President & CEO
    (780) 423-6931
    info@melcor.ca
    or
    Melcor Developments Ltd. - Investor Relations
    Naomi Stefura
    Acting CFO & Corporate Controller
    (780) 945-4654
    info@melcor.ca