2011-07-13_loan transaction

Avcorp closes $6,000,000 loan transaction with Panta and extends EDC debenture

July 13, 2011

VANCOUVER: Further to its news release dated May 26, 2011, Avcorp Industries Inc. (the “Company”) announces that it has completed the drawdown of a principal amount of $6,000,000 (the “Term Loan”) pursuant to its secured term loan agreement with Panta III B.V. (“Panta”) a wholly‐owned subsidiary of Panta Holdings B.V., a private investment vehicle, the principal of which is Mr. Jaap Rosen Jacobson, a director and controlling shareholder of Panta and a director of the Company.

The Term Loan is secured by the assets of the Company however is subordinate to other pre‐existing debt instruments. The proceeds of the Term Loan will provide the Company with further financial operational flexibility to carry out the Company’s business plan, the proceeds to be used specifically for the reduction of the Company’s operating facility.

As the conversion feature of the Term Loan was not approved by the Company’s shareholders at its June 16, 2011 Annual Meeting, the interest rate under the Term Loan is 15% per annum.

As partial consideration for the Term Loan, the Company issued to Panta, 19,550,532 common share purchase warrants (the “Panta Warrants”), each Panta Warrant exercisable on or before January 1, 2015 with respect to one Common Share at an exercise price of Cdn.$0.0713 per Common Share.

Currently Panta beneficially owns or exercises control over 88,314,176 Common Shares of the Company (representing approximately 45.2% of the current issued and outstanding Common Shares) and also, through Panta Canada B.V., holds a $1,771,000 principal amount 6% secured convertible note, convertible for up to 29,516,666 Common Shares (which note received both TSX approval and shareholder approval at the Company’s May 18, 2010 annual meeting) (the “Convertible Securities”). Assuming, the conversion of the Convertible Securities and the exercise of the Panta Warrants, Panta would then beneficially own or exercise control over 137,381,374 Common Shares (representing approximately 56.2% of the Common Shares outstanding after given effect to all such exercises and conversions).

Any securities issued in connection with the Panta Warrant will be subject to a restriction from resale for a period of four months and one day from the date of issue in accordance with applicable Canadian securities laws.

Extension of EDC Debenture
The Company has also entered into a First Amendment Waiver and Consent Agreement dated June 27, 2011 (the “EDC Amendment”) with Export Development Canada (“EDC”). Pursuant to the EDC Amendment, the terms of the Amended and Restated Unsecured Convertible Debenture dated December 31, 2009 (the “EDC Debenture”) have been amended such that the EDC Debenture now has a maturity date of March 31, 2016. There is no change to the interest rate of the EDC Debenture, and the conversion price with respect to the conversion of the EDC Debenture has been amended to $0.20 (the “Conversion Price Reduction”). In addition, beginning July 1, 2011 until June 30, 2012, the interest due on the EDC Debenture shall, as elected by EDC, be payable in common shares of the Company (the “Interest Conversion”) at the 5‐day volume weighted average trading price of the Company’s common shares calculated retroactively from the final day of the fiscal quarter. EDC has also agreed to accept 6,488,790 common shares of the Company in lieu of and in full and complete discharge of all accrued interest on the EDC Debenture to June 30, 2011 (the “Debt Conversion”).

The Conversion Price Reduction, the Interest Conversion and the Debt Conversion do not require shareholder approval, but are subject to TSX approval, which the Company is currently seeking.

The Company deems it to be in its best interest to complete the transactions relating to the EDC Amendment. No insiders of the Company are participating in these transactions.

Any securities issued in connection with the conversion of the EDC Debenture, the Interest Conversion and the Debt Conversion will be subject to a restriction from resale for a period of four months and one day from the date of issue in accordance with applicable Canadian securities laws

About Avcorp
Avcorp designs and builds major airframe structures for some of the world’s leading aircraft companies, including Boeing, Bombardier, and Cessna. With more than 50 years of experience, 565 skilled employees and 354,000 square feet of facilities, Avcorp offers integrated composite and metallic aircraft structures to aircraft manufacturers, a distinct advantage in the pursuit of contracts for new aircraft designs, which require lower‐cost, light‐weight, strong, reliable structures. Avcorp is a Canadian public company traded on the Toronto Stock Exchange (TSX:AVP).

Sandi DiPrimo, Investor Relations Contact | 604-587-4938

About Export Development Canada (EDC)
EDC is Canada’s export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC’s knowledge and partnerships are used by more than 8,200 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self‐sustaining and a recognized leader in financial reporting and economic analysis.
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