Gulfstream International Group, Inc. (GIA) hopes to net Gulfstream approximately $5.17 million in proceeds from the sale of the Senior Debentures and Junior Debentures, net of fees and expenses. Proceeds of the financings will go toward repaying an existing secured line of credit, to finance the company's expansion of service in its new Cleveland, Ohio hub and for general working capital purposes.
It launched a new hub operation last month as a Continental Connection at Cleveland serving Dubois and Franklin, Penn as well as Lewisburg, W. Va. This month is begins service to Bradford, Penn and Jamestown, N.Y.
The company announced an agreement to sell to an unnamed institutional investor $5.10 million in face amount of secured original issue discount debentures (the "Senior Debentures"). In addition, Gulfstream will issue to the investor a warrant to purchase 578,870 shares of Gulfstream common stock, exercisable at nominal value. The investor has the right to require Gulfstream to repurchase the warrants if they are not exercised within three years.
As a condition to consummating the Senior Debenture transaction, Gulfstream is required to raise an additional $1 million through the sale of subordinated debentures. The company is in the process of finalizing an agreement to sell $1.00 million in aggregate principal amount of junior secured debentures (the "Junior Debentures"). Additionally, the company agreed that the Junior Debentures may convert, at the holder's option, into Gulfstream common stock at a conversion price of $3.00 per share. Holders of the Junior Debentures will receive warrants to purchase 225,000 shares of Gulfstream common stock, exercisable at $3.20 per share. Upon conversion of the Junior Debentures, the number of shares issuable under these warrants would decrease by 58,333.
The Senior Debentures will bear an initial interest rate of 11 percent, and amortize over a 36 month period. The Junior Debentures accrue interest at a rate of 12 percent per annum, only a portion of which is payable currently, and mature 38 months after issuance without scheduled amortization.
The debentures, warrants and shares of common stock issuable upon exercise of the warrants have not been registered under the Securities Act, or any state securities laws, and will be issued pursuant to a private transaction under Regulation D. The debentures, warrants and shares of common stock underlying the warrants may not be reoffered or resold in the United States unless the re-offer or resale is registered or unless exemptions from the registration requirements of the Securities Act and applicable state laws are available.