Toy maker Mega Brands Inc. has clinched approval of its refinancing plan from its major lenders.
The Montreal-based company said Tuesday that secured debt holders voted 91.4 per cent for a proposed transaction that would shrink the debt to $131-million (U.S.) from almost $300-million while also diluting existing shareholders with a massive new equity issue.
Among a series of deals in the recapitalization plan are a $100-million bought-deal financing led by GMP Securities and a $121-million private placement to Toronto-based Fairfax Financial Holdings Ltd., as well as a $50-million asset-based facility from Wachovia Capital Finance Corp.
The new financing will allow Mega Brands to pay out $215.3-million to its senior secured debt holders, about 70 per cent of what they are owed.
Shareholders were also expected to vote on the plan Tuesday.
Mega Brands plans to issue 321 million new common shares.
Some shareholders have expressed their concern over the dilution of their stake, but the alternative would likely have been a filing for court-ordered bankruptcy protection from the creditors, a scenario that would likely have meant little or nothing for equity holders.
The transaction was approved by 99.4 per cent of holders of common shares.
The company said in a statement that the votes allow it to proceed with winning final approval court approval for the restructuring in Canada, and getting recognition of the transaction in the U.S.