To our knowledge, this is the first offering of its kind in Canada, and was conducted by way of short form prospectus offering in Canada and on a private placement basis in the US.

Each unit consisted of a US$1,000 principal amount of senior unsecured notes and sixty-five common shares of Crystallex for an aggregate issue price of US$ 1,000. Like many issuers at the same stage of development, Crystallex required project financing, but was faced with the unappetizing prospect of significant dilution if it were to issue common shares or convertible debentures.

Similarly, an issue of high-yield debt would likely have carried with it a coupon that would have been unacceptable to Crystallex. By structuring the transaction as a unit offering, Crystallex was able to minimize both the amount of potential dilution and the quantum of interest that would be paid on the notes - the seven year notes bear interest at 9.375 per cent.

The notes rank senior to convertible debt, rank equally with all unsecured and unsubordinated indebtedness and rank junior to a specified amount of project indebtedness with respect to Las Cristinas. The covenants on the notes include a standard negative pledge, a limitation on indebtedness, restrictions on a change of control, a limitation on the sale of the project and other standard high-yield debt covenants.

For the protection of investors, two escrow pools were established - one for the first three interest payments due on the notes and the other for the balance of the net proceeds of the offering, to be released in accordance with the capital budget established for the project.

The offering was very well received in both Canada and the US, since investors were able to take advantage of an instrument that offered the opportunity to participate in the growth of Crystallex through the common shares, as well as the attractive interest rate provided by the notes.

While the strategy was not utilized in connection with this offering, issuers in similar circumstances may consider setting up an unallocated shelf prospectus, which would provide the flexibility of issuing units, common shares, convertible debentures or straight debt in order to fund project finance requirements.