Student Transportation Announces TSX Approval Normal Course Issuer Bid

Student Transportation Announces TSX Approval Normal Course Issuer Bid

Toronto, Ontario – December 15, 2006 – Student Transportation of America Ltd. (TSX: STB.UN) and Student Transportation of America ULC (collectively, “STA”) announced today that the Toronto Stock Exchange (“TSX”) has approved STA’s notice of intention to make a normal course issuer bid for a portion of its Income Participating Securities (“IPSs”) as appropriate opportunities arise from time to time. Each IPS representing one common share (“Common Shares”) of Student Transportation of America Ltd. and $3.847 principal amount of 14% subordinated notes (“Notes”) of Student Transportation of America ULC. STA’s normal course issuer bid will be made in accordance with the requirements of the exchange. STA may begin to purchase IPSs on or about December 15, 2006. No previous purchases of the IPSs have been made.

As of December 1, 2006, 20,745,554 IPSs were outstanding. Pursuant to the notice, STA intends to acquire up to 400,000 IPSs in the 12-month period commencing December 15, 2006 and ending on December 15, 2007, which figure represents 2% of STA’s public float; provided, however, that in no event shall purchases made under this bid and the previously announced normal course issuer bid by Student Transportation of America ULC for a portion of its 14% subordinate notes, exceed US$5 million. Purchases will be made at market prices through the facilities of the exchange. The IPSs, and the underlying Common Shares and Notes, will be cancelled upon their purchase by STA. STA will fund the purchases either through borrowings on its senior debt facility or out of available cash. The boards of directors of STA believes that the purchase by STA of a portion of its IPSs is an appropriate use of senior borrowing capacity and/or available cash and is in the best interests of STA and its securityholders as such purchases would significantly lower the cost of funds related to the Common Shares and Notes cancelled.

“Our plan is to purchase up to 400,000 units over a period of time established by the TSX guidelines in our NCIB. We will retire the subordinated debt portion and the common equity share if we acquire any units,” said Denis J. Gallagher, Chairman & CEO. “This move will be accretive and lower our interest cost immediately due to the 14% sub note coupon in the unit. If we purchase just the debt portion, shareholders can still own the common share of the unit which currently has about 6-7 per cent Canadian qualified dividend yield which is very favourable for Canadian investors. Investors need to know they own two securities with each IPS unit; common shares and debt. We have allowed our investors to unclip and trade these separately, if they choose.”

“The IPS structure for companies with significant US revenues and earnings is unique. STA is not an income trust nor is it a partnership,” Mr. Gallagher added. “We are a Canadian corporation with a Canadian qualified common share dividend and a high yield bond which pays interest to bond holders. Since 93% of our revenues and earnings are derived from the US, we are not subject to Canadian taxes on the US earnings.”

The notice of intention provides that no appraisal or valuation regarding STA, its material assets or securities, has been prepared within the two years preceding the date of the notice.


The Issuer is the fifth-largest provider of school bus transportation services in North America, conducting operations through local operating subsidiaries. The Issuer has become a leading school bus transportation company by aggregating operations through the consolidation of existing providers and conversion of in-house operations and currently operates more than 4,000 school vehicles in North America. For more information, please visit

Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of applicable securities laws, which reflects the expectations of management regarding the Issuer’s and Company’s results of operations, expense levels, seasonality, cash flows, performance, liquidity, borrowing availability, financial ratios, ability to execute the Company’s growth strategy and cash distributions. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “track”, “targeted”, “estimate”, “anticipate”, “believe”, “should”, “could”, “plans” or “continue” or similar expressions suggesting future outcomes or events. These forward looking statements reflect the Company’s current expectations regarding anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward looking statements involve significant risks and uncertainties, and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at which or by the performance or results will be achieved. A number of factors could cause our actual results to differ materially from the results discussed, expressed or implied in any forward-looking statement made by us or on our behalf, including, but not limited to, the factors discussed under “Risk Factors” in our Annual Information Form. These forward looking statements are made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

For more information contact:

Denis J. Gallagher

Chairman and Chief Executive Officer

Phone: (732) 280-4200

Fax: (732) 280-4213

Patrick J. Walker

Chief Financial Officer

Phone (732) 280-4200

Fax: (732) 280-4213

Keith P. Engelbert

Director of Investor Relations

Phone: (732) 280-4200

Fax: (732) 280-4213