Fairfax Financial signs on for $25 million in tandem with other investor

GMP Capital Trust has agreed to privately place up to 4,615,400 preferred security units at $6.50 per unit, for gross proceeds of up to $30 million, the company announced Monday.

The net proceeds from sale of the units will be used to enhance GMP’s liquidity position, to pursue strategic opportunities and for general corporate purposes, the company said.

Each unit will consist of one $6.50 par value 10% cumulative perpetual non-voting preferred limited partnership unit of GMP Preferred L.P., a newly formed indirect subsidiary of GMP, and one warrant to purchase one fund unit of GMP at an exercise price of $6.50. The preferred limited partnership units will be entitled to receive a 10% cumulative perpetual preferred distribution in cash when declared by the general partner of GMP Preferred L.P. The warrants will be exercisable at the holder’s option at any time and from time to time, in whole or in part, for five years.

GMP and GMP Preferred L.P. may issue units having a maximum aggregate value of $30 million for which firm commitments of $25 million have been received in combination from Fairfax Financial Holdings Ltd. and another leading Canadian investor. In addition, certain employees and members of management of GMP have agreed to subscribe for $5 million of the Offering.

The preferred limited partnership units may be redeemed by GMP Preferred L.P. at any time after the first anniversary of the closing of the offering, in whole or in part. GMP Preferred L.P. may redeem the preferred limited partnership units in cash at 10% above par value, plus accrued but unpaid distributions, in the four-year period following the first anniversary of closing and at par value, plus accrued but unpaid distributions, after the fifth anniversary. The preferred limited partnership units and the warrants will not be listed or trade on any stock exchange and will be subject to restrictions on transfer in accordance with applicable securities legislation.

Closing of the offering is is expected to take place in the second half of December.

“We are pleased that Fairfax has decided to make a significant investment in GMP. This transaction further validates the strength of our franchise and provides us with even greater flexibility to weather current market conditions and pursue opportunities in the Canadian capital markets going forward,” said Kevin Sullivan, CEO of GMP.

GMP Securities L.P., Dundee Securities Corp., Blackmont Capital Inc., and Thomas Weisel Partners Canada Inc. are acting as agents for GMP Capital Trust on this transaction.