Polaris Geothermal Inc.

Polaris Geothermal Inc.

March 20, 2008 21:50 ET

Polaris Geothermal Inc. Announces $27 Million Debenture Private Placement

TORONTO, ONTARIO--(Marketwire - March 20, 2008) -


Polaris Geothermal Inc. (TSX:GEO) ("Polaris Geothermal" or the "Company") is pleased to announce that it has entered into an agreement with Jacob & Company Securities Inc. ("Jacob & Co.") for a private placement of up to 27,000 units ("Units") at a price of $1,000 per Unit resulting in gross proceeds of $27 million to Polaris Geothermal (the "Offering"). Each Unit will consist of: $1,000 principal amount of 9.5% secured senior debenture of Polaris Geothermal (a "Debenture"), 667 warrants (the "Warrants") and 75 penalty rights (the "Rights"). Jacob & Co. will act as agent for the Offering to offer the Units on a best efforts basis.

The Debentures will have a term of 18 months, will bear interest at the rate of 9.5% per annum calculated annually and payable quarterly in arrears and may be prepaid in whole or in part at any time by the Company on at least 7 days notice without penalty or bonus. All Debentures will rank pari passu. The Debentures will be issued pursuant to a debenture indenture to be entered into between the Company and a trust company as indenture trustee (the "Trustee"). The debentures will be secured by specific charge over the Company's assets, a general security agreement from the Company in favour of the Trustee, a share pledge agreement by the Company to pledge the shares of the direct subsidiary, and guarantees, share pledge agreements and other security from certain of the Company's subsidiaries.

Each Warrant will entitle the holder thereof to subscribe for one Class A voting common share at $1.50 per share at any time until the date that is the earlier of: (i) 24 months from closing, and (ii) the 31st day after the Company has provided written notice that the closing price for the Class A voting common shares of the Company on the Toronto Stock Exchange has been at or over $2.25 per share for 40 consecutive trading days with such written notice provided within five business days after such 40 trading day period.

Each Right will entitle the holder to acquire one Class A voting common share with no additional consideration. With respect to each Unit, 25 Rights will be exercisable after each of 6, 12, and 18 months plus a day after closing, provided the Debenture comprising the same Unit is outstanding at the applicable exercise time.

Pursuant to the terms of the engagement letter in connection with the Offering, the Company will pay Jacob & Co. a fee of 7% of the gross proceeds of the Offering and issue a compensation option to acquire 7% of the Units sold in the Offering.

Under the rules of the Toronto Stock Exchange, the Offering is subject to shareholder approval. The Company expects that it will rely on an exemption from the requirement to obtain shareholder approval at a meeting of shareholders by receiving written consent to the Offering from holders of more than 50% of the Class A voting common shares (other than shares excluded as required by the Toronto Stock Exchange).

Skyberry Holdings Ltd. ("Skyberry"), a Bahamian business corporation, is expected to subscribe for approximately 20,000 Units. Skyberry is an insider of the Company as it currently holds approximately 22% of the Company's Class A voting common shares on a non-diluted basis, or 36.31% on a diluted basis. Accordingly, Skyberry's subscription of Units will constitute a related party transaction under Multilateral Instrument 61-101- Protection of Minority Security Holders in Special Transactions ("MI 61-101"). Following the completion of the Offering, Skyberry's holdings in the Company will remain unchanged on a non-diluted basis, but will increase to 45% on a diluted basis (assuming that the warrants and rights held by Skyberry are exercised). When approving the Offering, the board of directors of the Company considered the related party transaction with Skyberry and there was no contrary view or abstention by any director. Skyberry's subscription in the Offering will be on the same terms as other arm's length investors. As the value of Skyberry's investment will be less than 25% of the Company's current market capitalization and Skyberry's subscription will be a distribution of securities for cash, the Company will be exempt from the formal valuation and minority shareholder approval requirements under MI 61-101 with respect to the related party transaction with Skyberry. Because the terms of the Offering were not finalized until March 14, 2008, the Company's material change report will be filed in less than 21 days before the expected date of the completion of the Offering.

The net proceeds of the Offering will be used to retire the Company's existing 9% redeemable secured debentures issued in March 2006. Currently, the aggregate outstanding principal and interest amount for the March 2006 debentures is approximately US$8.3 million. The remainder of the net proceeds will be used for general corporate purposes.

The Offering is subject to the receipt of all necessary approvals, including regulatory and stock exchange approvals. Closing is expected to occur on or about March 26, 2008.

All of the securities issued in connection with the Offering will be subject to a four-month hold period from the date of issue.

This news release is not an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available. Any public offering of the securities to be made in the United States will be made by means of a prospectus that may be obtained from the Company or Jacob & Co. and that will contain detailed information about the Company and its management, as well as financial statements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. All dollars in this news release are in Canadian funds.


Polaris Geothermal Inc. is a renewable energy company currently focused on the development of geothermal energy projects in Latin America. Polaris is currently developing the initial project on its San Jacinto-Tizate geothermal concession near Leon, Nicaragua, located 90 km due northwest of the capital, Managua.


Jacob & Co. is an independent investment bank with a leading financing and advisory business focused in the renewable power and infrastructure sectors. In the previous three years Jacob & Co. principals have managed and structured over 30 transactions in the renewable power sector and have participated in renewable financings valued at more than $1.5 billion.


This press release includes certain "forward-looking statements". Statements respecting the completion of the Offering and development of the San Jacinto-Tizate geothermal project, including receiving the requisite approvals, the Company's ability to meet drilling schedules in a timely manner and achieving projected production levels are forward looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. All statements that are not historical facts, including without limitation statements regarding future estimates, plans, objectives, assumptions or expectations of future performance, are "forward-looking statements". We caution you that such "forward looking statements" involve known and unknown risks and uncertainties that could cause actual results and future events to differ materially from those anticipated in such statements. Such risks and uncertainties include unpredictable actions of the Nicaraguan government, political risk, changes in legal, social or political conditions in Nicaragua, lack of appropriate funding and other risk factors, as discussed in the Company's filings with Canadian securities regulatory agencies. The Company expressly disclaims any obligation to update any forward-looking statements.

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