Mumbai: Imax Corporation has entered into two significant financing transactions, one with Wachovia Capital Finance Corporation to increase future availability and modify other terms under the company’s existing credit facility, and one with the Douglas family, Imax’s largest shareholder, for the sale of approximately 2.73 million common shares in a private placement at an aggregate purchase price of $18 million.
Proceeds from these transactions will be used to fund the company’s Imax Digital projection roll-out, slated to begin this summer, and for general corporate purposes.
"We have always believed that the attractive returns from existing joint ventures would enable us to finance our broader digital rollout," said Imax co-chairmen and co-CEOs Richard L. Gelfond and Bradley J. Wechsler. "Now our bank and our largest shareholder have each stepped forward to provide us with increased availability of credit and cash, which we believe will enable us to effectively execute on our existing plan. Coupled with our cash on hand, we expect that these deals will ultimately provide us with access to roughly $55 – 60 million in funding."
Imax and Wachovia entered into an amendment on 5 May which extends the term of the facility to 31 October, 2010, removes an EBITDA maintenance covenant provided the company maintains certain minimum liquidity requirements, and is likely to increase the company’s borrowing base.
"We believe these changes will ensure our access to more money for a longer period of time, mitigating operating risk," added Messrs. Gelfond and Wechsler. "The amended terms of the line allow us to draw down approximately $24.4 million today, and we believe that as our borrowing base increases in accordance with the terms of the agreement we may be able to take down close to $30 million."
Additionally, on 5 May, the company entered into an agreement with the Douglas family for the sale of approximately 2.73 million of the company’s common shares for a total purchase price of $18 million, or approximately $6.60 per share (the equivalent of the average closing Imax common share price over the most recent five trading days).
The Douglas family, which will own 19.9% of the company’s common shares post-transaction, has agreed to a five-year standstill with the company whereby it will refrain from certain activities, such as increasing its percentage ownership in the company and entering into various arrangements with the company such as fundamental or change-of-control transactions. The company has granted the Douglas family registration rights in connection with the newly-acquired shares. The private placement is expected to close on May 8, 2008 and is subject to customary closing conditions.
"The Douglas family has been an extremely supportive shareholder group, and we’re pleased that they have recognized the potential in Imax and the opportunity to invest at this level at this time," said Messrs. Gelfond and Wechsler. "The good news is that as a result of today’s announcements, we do not believe we will need additional financing to fund our digital rollout under the current business model."