Timbercreek Senior Mortgage Investment Corporation Announces Proposed Transition to Public Company Regulatory Regime

Toronto Stock Exchange: MTG

TORONTO, July 15, 2013 /CNW/ - Timbercreek Senior Mortgage Investment Corporation (the "Corporation") announced today that the board of directors of the Corporation (the "Board") has called a special meeting of all shareholders to, among other things, consider approving the transition (the "Proposed Transition") of the Corporation from the Canadian securities regulatory regime for investment funds (the "Investment Fund Regime") to the regulatory regime for non-investment fund reporting issuers (the "Public Company Regime").

This decision is a pro-active response to the Canadian Securities Administrators' ("CSA")  proposed regulatory changes to mortgage investment rules governing non-redeemable investment funds published on March 27, 2013 (the "Proposed Regulatory Change").  The Proposed Regulatory Change, if implemented, will impact issuers such as the Corporation that are classified as investment funds pursuant to Canadian securities laws. Among the proposed changes is a new restriction prohibiting any investment fund from investing in mortgages other than mortgages that are fully and unconditionally guaranteed by the government of Canada, the government of a province or territory of Canada or by an agency of such government ("Guaranteed Mortgages").

Since inception, the Corporation has successfully generated stable, monthly distributions as well as a stable net asset value for its investors by maintaining a diversified portfolio of shorter term, customized first mortgage loans to experienced borrowers. In that context, the Board believes that it is in the best interest of the Corporation and its shareholders to continue the Corporation's current investment objectives and strategy under the Public Company Regime, to avoid the potential restrictions to the business of the Corporation if the Proposed Regulatory Change is implemented.

Following the Proposed Transition, the Corporation would continue to qualify as a mortgage investment corporation ("MIC") under the Income Tax Act (Canada) and would maintain the same investment objectives and strategies.  Some key differences between the operation of the Corporation before and after the Proposed Transition are as follows:

  Investment Fund Regime Public Company Regime
Continuous Disclosure Semi-Annual Reporting in compliance with Investment Fund Regime with Management Report of Fund Performance

Publication of net asset value on a monthly basis

Quarterly Portfolio Disclosure
Quarterly Reporting in compliance with Public Company Regime with Management Discussion and Analysis

Evaluated based on Book Value not net asset value
Basis of Accounting Canadian GAAP (Part V) IFRS
Class Structure Multiple Share Classes One Public Share Class
Shareholder Authority Non-Voting Shares Voting Shares
Liquidity Redeemable Annually at NRV per Share subject to a 15% cap. Non-Redeemable (other than a one-time redemption right on the Redemption Date)
Governance Shareholder approval only required on special resolutions as per CBCA or the Articles

Audit Committees  and Independent Review Committees
Subject to Annual General Meetings and general voting rights (including election of directors) given to investors

Audit and Nomination Committees
Trailer Fees 0.50% annually paid to advisors of record on publicly traded Class A Shares No trailer fee paid

As indicated above, the Board is of the view that the Proposed Transition provides shareholders a number of benefits, including:

  • the Corporation's ability to continue its operation in accordance with existing investment objectives and strategies;
  • the elimination of the trailer fee paid on Class A Shares will leave more of the income generated by the Corporation at any relevant time to be available for distribution to investors;
  • the grant of shareholder voting rights;
  • increased frequency of financial reporting;
  • the potential for research analyst coverage which does not cover investment funds; and
  • increased stability of capital resulting from the elimination of the redemption feature.

In addition, if the Proposed Transition is approved, shareholders of each class will be offered a one-time redemption right (subject to an aggregate maximum of 15% of outstanding shares) following the effective date.

Shareholders will be asked at the meeting to consider and if thought fit, approve the Proposed Transition and certain consequential amendments to the share rights and articles, including an automatic exchange of the Class B Shares, Class I Shares and Class J Shares into Class A shares and the repurchase (for nominal value) of the voting shares that are currently not held publicly, resulting in the Class A Shares being the only class of shares of the Corporation. The Class A Shares will have voting rights typical of a common share class. Furthermore, the shareholders will also be asked to consider and if thought fit, approve, certain consequential amendments to the Management Agreement resulting from the Proposed Transition and the related changes described above.

The Corporation has retained TD Securities Inc., CIBC World Markets Inc. and Raymond James Ltd. to act as soliciting dealers and financial advisors to the Corporation during the Proposed Transition.

The Manager expects the meeting date to be on or about September 9, 2013. A notice of meeting and management information circular, containing additional details about the special resolutions to be considered at the meeting, and the Corporation's view of the benefits of the Proposed Transition, is currently scheduled to be mailed to all registered shareholders next month.

For information, please visit www.timbercreek.com

SOURCE: Timbercreek Senior Mortgage Investment Corporation

For further information:

Carrie Morris
Investor Relations
416-800-1552
cmorris@timbercreek.com

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Timbercreek Senior Mortgage Investment Corporation

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