MONTREAL, Aug. 10 /CNW Telbec/ - Recent financial results reported by Boralex Power Income Fund (the "Boralex Fund") show positive free cash flow of +$23M so far in 2010 and a +48% increase in cash balances, while in results disclosed last Friday Boralex Inc. ("Boralex") shows negative free cash flow of -$46M and EBITDA down -60% for Q2 2010 (compared to Q2 2009). These results disclosed by Boralex Inc. on Friday, demonstrate difficulties faced by Boralex Inc. compared to strengths of Boralex Fund, and the financial data are much clearer than the management commentary in the Q2 2010 reports. O'Leary Funds Management LP ("O'Leary Funds") announced today that it continues to oppose and will not accept the amended offer by Boralex Inc. and has requested an investigation of this proposed transaction by securities regulators.
Investors owning units ("BPT.un") of the Boralex Fund who previously tendered units in connection with the acquisition proposed by Boralex Inc. and who are concerned by this financial deterioration at Boralex Inc., may be interested to know that the deal is NOT YET FINAL. They have a brief period during which they MAY WITHDRAW TENDERED UNITS, thereby reducing the risk of being forced to accept the securities proposed by Boralex Inc. In order to WITHDRAW TENDERED UNITS, investors should contact their financial advisor or otherwise contact CDS Clearing and Depository Services Inc. (see below "WITHDRAW TENDERED UNITS"). Investors who withdraw tendered units, or who have not tendered, have the same rights as those who tendered, in the event the proposed acquisition is completed. Investors who are evaluating statements by Boralex Inc. should note that its CEO, Patrick Lemaire, on June 28, 2010 said they had "no intention of increasing" their initial offer, yet they increased it two weeks later, which suggests Boralex Inc. could again amend their offer regardless of what they have previously stated. Now that the Q2 2010 financial reports reveal that Boralex Inc. is generating seriously negative cash flow, while Boralex Fund continues generating strong positive cash flow, investors may find it very important to WITHDRAW TENDERED UNITS and retain ownership of Boralex Fund, rather than be forced to accept an inadequate price paid by Boralex Inc. issuing $300M of convertible debentures (one of the largest and most leveraged such issuances in Canadian market history) that may not find many buyers for the large volume of potential sellers.
Regarding Boralex Inc., the financial deterioration is a concern that we believe BPT.un unitholders should review closely because the Boralex Inc. offer consists of convertible debentures of Boralex Inc., which may now appear even less adequate as consideration and less attractive as an investment. Boralex Inc.'s financial reports for Q2 2010 also show that revenue plummeted 28% from the previous quarter, cash flow from operations was negative -$2M and free cash flow was negative -$46M. Adding to this concern, debt levels are extremely high, at $351M, and if the $300M of proposed convertible debentures are issued, the debt load of Boralex Inc. would increase to roughly $650M, plus roughly $140M debt of Boralex Fund. Also, due to the Boralex Inc. share price decline, the proposed convertible debenture now reflects a 52% conversion premium, which is unattractive for a power generation business with a history of negative free cash flow. Given these high debt levels and recently reported deteriorating cash flow at Boralex Inc., the convertible debentures of the proposed offer may fail to attract sufficient buyers to support normal market trading at a price equivalent or even close to the $5.00 indicated takeover price, which itself is inadequate.
In comparison, the Boralex Fund financial statements show a stronger position, with +53% more EBITDA in Q2 2010 than Boralex Inc, positive free cash flow of $12M and $11M in the past two financial quarters, much lower debt levels, and cash levels that increased from $15.87M at December 2009 to $23.49M as at June 30, 2010, an increase of $7.62M, or +48%. The decision to cut the distribution by the board of the Boralex Fund (which includes two directors and the CEO of Boralex) was announced on December 11, 2009, less than one month before Boralex Inc. expressed its interest to acquire the Fund, on January 7, 2010. We believe the cash currently on the balance sheet of the Fund belongs to unitholders of the Fund and should be paid out in the form of a special distribution. We estimate that this would provide a $0.40/BPT.un special distribution to unitholders. In contrast to Boralex Inc., Boralex Fund has a seven year history of positive free cash flow, of at least $38M annually, supporting attractive distributions to investors.
WITHDRAW TENDERED UNITS: Investors owning the Boralex Fund (BPT.un) should contact their advisor, investment dealer, broker or other nominee for assistance to withdraw BPT.un units which they have previously deposited pursuant to the Offer. Withdrawals of BPT.un units deposited must be effected via CDS Clearing and Depository Services Inc., Customer Service 416-365-8400 (www.cds.ca). A notice of withdrawal of BPT.un units deposited must actually be received by the depositary in a manner such that the depositary has a written or printed copy of such notice of withdrawal. The withdrawal will take effect upon actual physical receipt by the depositary of the properly completed notice of withdrawal.
SOURCE O'Leary Funds Management LP
For further information: For further information: Connor O'Brien, Chief Executive Officer, O'Leary Funds Management Inc., Chief Investment Officer, Stanton Asset Management Inc., (514) 849-0064 ext 224, firstname.lastname@example.org