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Aecon announces $80 million public offering of convertible debentures

Sep 20, 2010

Toronto, Ontario – September 20, 2010: Aecon Group Inc. (TSX: ARE) today announced that it has entered into an agreement with a syndicate of underwriters co-led by GMP Securities L.P. and TD Securities Inc., and including Raymond James Ltd., CIBC World Markets Inc., Macquarie Capital Markets Canada Ltd., BMO Capital Markets, Canaccord Genuity Corp., National Bank Financial Inc., Paradigm Capital Inc., and Scotia Capital Inc. pursuant to which the underwriters will purchase $80 million principal amount of convertible unsecured subordinated debentures at a price of $1,000 per debenture.  Aecon has also granted the underwriters an over-allotment option to purchase up to an additional $12 million aggregate principal amount of debentures for a period of 30 days following closing to cover over-allotments.

The convertible debentures will mature on October 31, 2015 and will accrue interest at the rate of 6.25% per annum payable on a semi-annual basis.  At the holder’s option, the convertible debentures may be converted into common shares in the capital of Aecon Group Inc. at any time up to the maturity date.  The conversion price will be $19.00 for each common share, subject to adjustment in certain circumstances.

The convertible debentures will be direct, unsecured obligations of Aecon Group Inc., subordinated to other indebtedness of the Company for borrowed money and ranking equally with all other unsecured subordinated indebtedness.

The convertible debentures will not be redeemable before October 31, 2013.  From October 31, 2013 through the maturity date, Aecon may, at its option, redeem the convertible debentures, in whole or in part, at par plus accrued and unpaid interest provided that the weighted average trading price of the common shares on the Toronto Stock Exchange during a specified period prior to redemption is not less than 125% of the conversion price. 

Subject to specified conditions, Aecon will have the right to repay the outstanding principal amount of the convertible debentures, on maturity or redemption, through the issuance of common shares of the Company.  Aecon also has the option to satisfy its obligation to pay interest through the issuance and sale of additional common shares of the Company.  Additionally, Aecon will have the option, subject to prior agreement of the holders, to settle its obligations on conversion by way of a cash payment of equal value.

Aecon will use the net proceeds of the offering to help fund the remaining purchase price payable in connection with the previously completed acquisition of assets from Cow Harbour Construction Ltd.

“The establishment of Aecon Mining, accomplished through the acquisition of Cow Harbour, adds an entirely new dimension to the services we offer in the Canadian oil sands,” stated Scott Balfour, President of Aecon Group Inc. “Coupled with Aecon’s existing civil and industrial capabilities in this market we are uniquely positioned to assist our clients and partners  through all phases of their project development - from early site servicing, civil construction, pipe fabrication, module assembly, and industrial field construction, through to ongoing overburden removal, contract mining and industrial facilities management.”.

“In financing the $180 million acquisition of Cow Harbour we were looking to put in place both flexible and cost effective financing," said David Smales, Aecon’s Chief Financial Officer. “The attractive terms of these convertible debentures, and in particular the increased financial flexibility they provide, will complement our intention to also put in place approximately $80 million in traditional equipment secured financing at cost effective rates. Taken together, this dual financing strategy is expected to have a positive impact on our surety program and will allow Aecon's liquidity and financial position to remain strong.”

The offering is scheduled to close on or about October 8, 2010 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange.

A preliminary short-form prospectus will be filed with securities regulatory authorities in all provinces of Canada. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction.

Aecon Group Inc. is Canada’s largest, publicly traded construction and infrastructure development company. Aecon and its subsidiaries provide services to private and public sector clients throughout Canada and on a selected basis internationally. Aecon is committed to safely and profitably delivering best of class services and products in an environmentally sensitive manner, and is pleased to be recognized as one of the 50 Best Employers in Canada.