AAR Prices Convertible Notes

WOOD DALE, Ill., Feb. 5 /PRNewswire-FirstCall/ -- AAR CORP. (NYSE: AIR)
today announced that it has agreed to sell $125.0 million aggregate principal
amount of 1.625% convertible senior notes due 2014 and $100.0 million
aggregate principal amount of 2.25% convertible senior notes due 2016
(together, the "Notes") in a private offering to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"). The final terms of the Notes reflect an increase of
$50 million over the amount announced in the Company's initial press release.
The Company has also granted an option to the initial purchasers for up to an
additional $25.0 million in principal amount of Notes. Upon conversion,
holders will receive cash up to the principal amount, and any excess
conversion value will be delivered, at the election of the Company, in cash,
common stock or a combination of cash and common stock. The conversion rate
will be 28.1116 shares of common stock per $1,000 principal amount of Notes,
which is equivalent to a conversion price of approximately $35.57 per share of
common stock. The conversion rate will be subject to adjustment upon the
occurrence of specified events. The sale of the Notes is expected to close on
February 11, 2008.
The Company intends to use $125.0 million of the net proceeds of the
offering to repay short-term indebtedness under its revolving credit facility,
$26.6 million of the net proceeds to pay the net cost of the convertible note
hedge and warrant transactions that the Company expects to enter into with an
affiliate of one of the initial purchasers, and the remainder of the net
proceeds for general corporate purposes.
The convertible note hedge transactions will have an exercise price equal
to the conversion price of the Notes. The warrants associated with the Notes
will have an exercise price that is 75.0% higher than the closing price of the
Company's common stock on the NYSE on February 5, 2008. These transactions
are intended to reduce potential dilution to the Company's common stock upon
potential future conversion of the Notes and generally have the effect on the
Company of increasing the conversion price of the Notes to approximately
$48.83 per share, representing a 75.0% premium based on the last reported sale
price of $27.90 per share on February 5, 2008. In connection with these
transactions, the hedge counterparty has advised the Company that it or its
affiliates may enter into various derivative transactions with respect to the
Company's common stock concurrently with or shortly following pricing of the
Notes. These activities could have the effect of increasing or preventing a
decline in the price of the Company's common stock concurrently with or
following the pricing of the Notes. In addition, the hedge counterparty or
its affiliates may from time to time, following the pricing of the Notes,
enter into or unwind various derivative transactions with respect to the
Company's common stock and/or purchase or sell the Company's common stock in
secondary market transactions. These activities could have the effect of
decreasing the price of the Company's common stock and could affect the price
of the Notes.
The Notes have not been registered under the Securities Act, or any state
securities laws and, unless so registered, may not be offered or sold in the
United States except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and applicable
securities laws. This news release does not constitute an offer to sell or
the solicitation of an offer to buy the Notes, nor shall there be any sale of
the Notes in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
such state.
This news release contains forward-looking statements that involve risks
and uncertainties. These include statements regarding proposed securities
offerings, future acquisitions and other matters that are not historical
facts. These statements are based on management's current expectations and
are subject to a number of uncertainties and risks that could cause actual
results to differ materially from those described in the forward-looking
statements. Factors that may cause a difference include, but are not limited
to, changing conditions in debt markets, uncertainty of completing the
proposed sale of securities and of the timing and manner of selling those
shares, fluctuations in the price of the stock of AAR CORP., global, regional
and industry economic conditions, and legislative, regulatory and political
developments. Further information regarding these and other factors is
included in the filings by AAR CORP. with the U.S. Securities and Exchange
Commission.
SOURCE AAR CORP.

Richard J. Poulton, Vice President, Chief Financial Officer of AAR CORP.,
+1-630-227-2075, jpoulton@aarcorp.com