Gulfstream International, investor reach forbearance agreement

By Angela McDaniels

Tacoma, Wash., March 4 - Gulfstream International Group, Inc. said it entered into a forbearance agreement on Feb. 26 with Shelter Island Opportunity Fund, LLC, an investor who purchased a $5.1 million debenture from the company in a private placement in August 2008.

Events of default occurred when the company failed to pay interest for Dec. 31 and Jan. 31 and failed to achieve a minimum quarterly EBITDA of $350,000 for the fiscal quarter ended Dec. 31, according to an 8-K filing with the Securities and Exchange Commission.

Shelter Island agreed to forbear from exercising its rights and remedies related to the events of default until the company fails to comply with the terms, covenants and agreements of the forbearance agreement and the occurrence of any other event of default under the debenture.

One of the covenants under the forbearance agreement requires the company to raise an additional $1.5 million of debt or equity financing by March 26 or otherwise satisfy Shelter Island that the company has adequate liquidity and working capital. Once this covenant is satisfied, Shelter Island will waive the defaults.

The company has agreed to pay interest in cash each month beginning March 31 and to pay monthly installments on the outstanding principal amount beginning April 30. It may prepay all or any of the outstanding principal amount at a premium of 5%.

As part of the agreement, the company paid Shelter Island a $250,000 forbearance fee in the form of a 9% promissory note due on the earlier of Aug. 31, 2011 and the date the debenture is paid.

As part of the original private placement, Shelter Island received a warrant for 578,870 common shares exercisable for six years.

This warrant has been split into one warrant exercisable for 70,000 shares and a second warrant exercisable for a number of shares that, together with the first warrant, will equal 15% of the company's shares.

Finally, Shelter Island's put option was amended to fix the exercise price at $15.00 per share, or $1.05 million in total.

Fort Lauderdale, Fla.-based Gulfstream operates an airline and provides charter services.

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