Polyair Inter Pack Inc.

Polyair Inter Pack Inc.

December 18, 2008 15:57 ET

Polyair Inter Pack Inc. Completes Financing and Appoints New Senior Management

TORONTO, ONTARIO--(Marketwire - Dec. 18, 2008) -


Polyair Inter Pack Inc. ("PPK" or the "Company") (TSX:PPK), a North American producer of protective packaging products, announced today completion of the first tranche of the previously announced exchangeable secured debenture financing by Polyair Corporation, the Company's principal U.S. operating subsidiary, with its principal shareholder Glencoe Skydome Holdings, L.P. ("GSH"). The exchangeable secured debentures ("ESDs") are issuable in two separate tranches - $5 million 9% ESDs which were issued today and $3 million 15% ESDs which are issuable at a subsequent date as the Company may require. Proceeds of the financing will be used for working capital, capital expenditures and general corporate purposes.

The ESDs are joint and several obligations of Polyair Corporation and the Company, mature on December 17, 2013, are guaranteed by the Company and its subsidiaries (excluding joint venture entities), are secured on all of the assets of Polyair Corporation, the Company and the guarantors, and are subordinate in right of payment to the Company's existing revolving credit facility and equipment/term loan. The ESDs are exchangeable into common shares of the Company at a price of $0.05 per share. Interest on the ESDs may, at the option of Polyair Corporation and the Company, be paid in cash or further ESDs. If the co-obligors elect 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. All of the ESDs will be subject to mandatory exchange upon the exchange of a majority of the outstanding ESDs and, if the holders of a majority of the outstanding ESDs elect to have interest paid in common shares of the Company upon exchange, all holders of ESDs will be bound by that election.

Any shareholder of the Company as at December 11, 2008 (other than GSH) who qualifies as an "accredited investor" under applicable Canadian securities laws and is resident in Canada is entitled to subscribe on a private placement basis for its pro rata portion of each tranche. Subscriptions in respect of the first tranche are subject to acceptance by the Company until January 17, 2008; further information may be obtained from the Company. Each subscriber for ESDs (including GSH) must enter into a shareholders' agreement at the time such subscriber exchanges its ESDs for common shares, 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.

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 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 Polyair Corporation and the Company elect to pay interest in further ESDs rather than in cash.

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 has received approval from The Toronto Stock Exchange, subject to fulfilment of certain conditions, 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.

The Company also today reached agreement with its principal lender for a restructuring of its $3.3 million term loan, modifications of its loan covenants and an extension of the maturity of its revolver facility to November 1, 2010. The Company prepaid on December 15, 2008 the 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 Company also announced the appointment of several new executives. Gary Tessitore has been appointed CEO effective December 21, 2008 and to the board of directors of the Company with immediate effect. Michael McEntee has been appointed Chief Financial Officer and Martin Gilvarg has been appointed Executive Vice President, both with immediate effect. These executives bring broad experience across a wide range of industries and significant experience in managing businesses in difficult market conditions.

Robert Gerrity, the interim CEO and PPK Board member stated: " The Company is very pleased with GSH's confidence in the Company and the new senior management team. The combination of the restructuring of the Company's financing agreements with its primary lender, the conclusion of both tranches of additional financing and new leadership, position Polyair well for the anticipated challenging market environment facing the Company in 2009."

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 above amounts are in US dollars, unless otherwise noted.

This press release, required by applicable Canadian laws, is not for publication or distribution in or into the United States of America (including its territories and possessions, any state of the United States and the District of Columbia). 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.

Contact Information

  • Polyair Inter Pack Inc.
    Stysia Reay
    Investor Relations
    (416) 679-6591
    Website: www.polyair.com