Polyair Inter Pack Inc.

Polyair Inter Pack Inc.

December 11, 2008 15:29 ET

Polyair Inter Pack Inc. Announces Repricing of Proposed USD$8 Million Debenture Financing

TORONTO, ONTARIO--(Marketwire - Dec. 11, 2008) -


Polyair Inter Pack Inc. ("PPK" or the "Company") (TSX:PPK), a North American producer of protective packaging products, today announced that the terms of its previously announced $8 million exchangeable secured debenture financing from its principal shareholder, Glencoe Skydome Holdings L.P. ("GSH"), have been modified to include, among other things a repricing of the exchange feature. The proposed terms of the exchangeable secured debentures ("ESDs"), which are issuable in two separate tranches - $5 million 9% ESDs at closing and up to an additional $3 million 15% ESDs at a subsequent date as the Company may require - and were originally to be exchangeable into common shares of the Company at prices of CAD$0.50 per share for the first tranche and CAD$0.25 per share for the second tranche, have been modified to provide that the ESDs will be exchangeable into common shares of the Company at a price of $0.05 per share for both tranches. The repricing is a result of general economic and market conditions.

Shareholders of the Company who qualify as "accredited investors" under applicable Canadian securities laws will be invited, by means of a press release announcing the closing of the first tranche of the financing, to subscribe for a pro rata portion of each tranche. There are currently 6,997,250 common shares of the Company outstanding. The principal amount of the first, $5 million, tranche of ESDs can be exchanged for 100 million common shares and the principal amount of the second, $3 million tranche of ESDs, can be exchanged for a further 60 million common shares. GSH currently holds 3,630,412 common shares, representing 51.88% of the total outstanding common shares of the Company. If both tranches of ESDs are issued, no shareholders other than GSH subscribe for the ESDs and GSH exchanges $8 million principal amount of such ESDs for common shares of the Company, GSH would be the holder of 163,630,412 common shares or 97.98% of the total outstanding common shares of the Company, representing a dilution of 95.80%. Additional dilution may result if the Company elects to pay interest in further ESDs rather than in cash. Proceeds of the financing will be used for working capital, capital expenditures and general corporate purposes.

In addition to the repricing, the terms of the financing have been modified to provide that: the subscription by "accredited investors" will not give rise to an entitlement to subscribe pro rata for any unsubscribed balance; all of the ESDs will be subject to mandatory exchange upon the exchange of a majority of the outstanding ESDs; and, if the Company elects to pay interest in further ESDs, the holder of such additional ESDs may elect to have such ESDs exchanged for cash upon the exchange of the original ESDs. Finally, subscribers for ESDs (including GSH) must enter into a shareholders' agreement at the time such subscriber exchanges their ESDs, which agreement includes obligations in respect of the ownership, sale and voting of the common shares received upon such exchange. The shareholders agreement imposes no restrictions on other common shares held by such subscriber.

The financing commitment remains subject to amendment of the Company's existing credit facilities, including the further extension of the maturity of the $1.7 million outstanding amount of the principal on its interim term loan due on December 16, 2008, the receipt of all requisite regulatory approvals, the entering into of definitive documentation and other customary conditions. The financing commitment is also conditional upon the prepayment by the Company of an outstanding $5 million principal amount 6% convertible promissory note to mature in March 2009 by the issuance of 598,802 non-voting, non-participating, redeemable, convertible 6% cumulative Series A Preference Shares. The holder of the promissory note has confirmed acceptance of the Company's notice to prepay.

Closing of the first tranche of the ESDs, which is anticipated to occur on or before December 16, 2008, may be less than 21 days from the date of this announcement.

The transaction has been unanimously approved by a committee of independent directors of the Company. GSH is a "related party" of the Company under applicable Canadian securities laws; these laws provide for a financial hardship exemption from the requirement for a formal valuation and minority shareholder approval. The Company will be making application to The Toronto Stock Exchange for an exemption from its requirement for shareholder approval, also on the basis that the Company is in serious financial difficulty. The committee of independent directors has also determined that the Company meets the requirements of these exemptions, including that the financing is designed to improve the Company's financial situation and that its terms are reasonable in the circumstances of the Company. As a consequence of relying upon the TSX financial hardship exemption, the TSX has informed the Company that it will, in the ordinary course, commence a de-listing review. The Company will be required to satisfy all listing requirements of the TSX at the end of the review period and there are no assurances that the Company will be able to do so.

Polyair Inter Pack Inc. (www.polyair.com) manufactures and distributes a wide range of protective packaging products and swimming pool solar covers in North America. The Company operates eight manufacturing facilities, seven of which are in the USA where it generates the majority of its sales. All figures reported above are in US dollars, unless otherwise noted.

This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, unless registered or pursuant to an applicable exemption from registration.

Certain information included in this news release contains statements that are forward-looking, such as statements relating to anticipated future revenues and profitability of the Company. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on behalf of Polyair Inter Pack Inc. In addition, Polyair Inter Pack Inc. expressly disclaims any obligation to publicly update or alter its previously issued forward-looking statements.

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