Debenture Holder's Forum
On May 12, 2011 Discovery Air Inc. signed a Convertible Debenture Indenture with Computershare Trust Company of Canada providing for the issue of 8.375% June 30, 2016 convertible unsecured subordinated debentures. In November 2014, debenture holders approved a proposal by Discovery Air Inc. to amend the terms of the Indenture to extend the maturity date to June 30, 2018, and permit Clairvest Inc. to acquire additional common shares of the Company without requiring the Corporation to repurchase all of the Debentures then outstanding.
Over the next 3 years, Clairvest and certain funds managed by Clairvest became the majority shareholders of the Discovery Air Inc. common shares. On April 20, 2017 a Management Information Circular was issued which set out a special resolution that would permit a Clairvest controlled group to acquire all the remaining publicly held Discovery Air Inc. common shares for 20 cents per share. With the completion of the transaction scheduled for May 23, 2017, the publicly traded shares (DA.A on the TSX) would be delisted and the Company would become a private corporation. This was a clear and unequivocal breech of the Debenture Indenture, where Discovery Air Inc. had made the covenant to maintain the public listing of the DA.A common shares on the TSX, necessary to allow the conversion feature of the "Convertible" debentures to be maintained. A deliberate initiative to force out minority shareholders and delist the DA.A shares does not constitute "reasonable commercial efforts" to maintain the listing, and therefore an Event of Default had occurred. This should have forced the immediate redemption of the DA.DB.A debenture, which Computershare Trust, the Debenture Trustee, failed to initiate.