TORONTO, March 16 /CNW/ - GMP Capital Inc. ("GMP") (TSX: GMP) announced today that GMP and EdgeStone Capital Partners, L.P. ("EdgeStone") have finalized the terms of EdgeStone's employment arrangements with certain key senior officers, following the expiration of the original employment agreements entered into with those individuals in July 2006 in connection with GMP's acquisition of EdgeStone.
New employment arrangements were reached with Samuel Duboc, Gilbert Palter and Stephen Marshall (the "Principals"). Under the new arrangements, the Principals will continue in their current roles with ongoing management responsibility for EdgeStone Capital Equity Fund, L.P., EdgeStone Capital Equity Fund II-A, L.P., and EdgeStone Capital Equity Fund III (Canada), L.P. and all respective parallel investors (collectively, the "EdgeStone Funds"). The Principals will remain senior officers of EdgeStone until at least December 31, 2010, and potentially until the end of 2011. After ceasing to be senior officers, the Principals will continue to provide ongoing support and management services to the EdgeStone Funds through a consulting service arrangement reached between EdgeStone, GMP and the Principals.
Commenting on the new arrangements, Kevin Sullivan, Chief Executive Officer, GMP, said, "These new arrangements will not have any impact upon the management of the current EdgeStone Funds and, more generally, are expected to have little immediate impact on the day-to-day operations of EdgeStone. Sam, Gil and Steve have been business partners since the acquisition of EdgeStone in 2006 and, although we regret their decision to step down from their senior officer roles at some point over the next two years, we are pleased that they will continue to manage out the existing EdgeStone Funds to full realization through the consulting agreement. GMP remains committed to supporting the EdgeStone private capital business and working with EdgeStone employees and limited partners to grow the EdgeStone franchise."
These new employment arrangements represent a triggering event under the Canadian Institute of Chartered Accountants Handbook Section 3064, Goodwill and Intangible Assets, requiring GMP to perform an interim analysis of the carrying value of its goodwill related to the EdgeStone business. The goodwill, recorded at $65.4 million as at December 31, 2009, arose in connection with GMP's acquisition of EdgeStone in July 2006.
As a result of these arrangements, GMP expects to record a non-cash charge for goodwill impairment in the first quarter of 2010. A number of factors impact the level of impairment to be assessed and include the ongoing challenging market conditions for private equity and the expected management transition. We feel it is prudent to take a more conservative view on future fundraising as a result. The actual amount of the charge is still being determined, but it is anticipated that it may be a substantial portion of the goodwill recorded on GMP's balance sheet. GMP expects to complete its analysis during the first quarter of 2010 and report the results of the goodwill impairment assessment as part of the announcement of its first quarter 2010 results on May 7, 2010.
While the goodwill impairment charge will reduce reported net income and earnings per share in the first quarter of 2010, it will be non-cash in nature and will not affect GMP's liquidity, cash flow from operating activities, debt covenants or normal business operations. GMP continues to be well capitalized and its current operating trends as well as its financial results in the first quarter of 2010 are not factors contributing to this expected charge.
ABOUT GMP CAPITAL INC.
GMP Capital Inc. carries on business through the following principal entities: GMP Securities L.P., Griffiths McBurney Corp., GMP Securities Europe LLP, EdgeStone Capital Partners, L.P. and GMP Investment Management L.P. GMP Capital Inc. also has a significant ownership interest in Richardson GMP Limited. The GMP Capital Inc. website is gmpcapital.com. GMP Capital Inc. has offices in Toronto, Calgary, Montreal and London, England. GMP Securities L.P. is a leading independent Canadian investment dealer focused on investment banking and institutional equities for corporate clients and institutional investors. GMP Securities L.P. can be found on the web at gmpsecurities.com. Griffiths McBurney Corp. services institutional clients in the United States while GMP Securities Europe LLP provides investment banking and institutional equity services to clients located in Europe. EdgeStone Capital Partners, L.P. is one of Canada's leading private equity firms, providing capital, strategic direction and business and financial advice to help promising mid-market and early stage companies achieve their full potential. EdgeStone Capital Partners, L.P. can be found on the web at edgestone.com. GMP Investment Management L.P., through its private funds, seeks to generate superior risk-adjusted investment returns over the long term by executing selected investment strategies. GMP Investment Management L.P.'s offerings are aimed at both high-net-worth individuals and institutional investors. Richardson GMP Limited is a full-service investment firm, combining tradition and innovation to offer successful Canadian families and entrepreneurs access to exclusive and innovative wealth management and investment services delivered by some of Canada's finest independent investment professionals. Richardson GMP Limited can be found on the web at richardsongmp.com.
This press release contains "forward-looking statements" as defined under applicable Canadian securities laws concerning our goodwill impairment charge, earnings and ongoing operations and may also include additional forward-looking statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts but instead represent management's beliefs, expectations, estimates and projections regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. These statements include, but are not limited to, statements made with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.
These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in this press release. GMP's primary business activities are both competitive and subject to various risks. These risks include market, credit, liquidity, operational and legal and regulatory risks and other risk factors including, without limitation, variations in the market value of securities, the volatility and liquidity of equity trading markets, the volume of new financings and mergers and acquisitions, competition in the marketplace for suitable investments, sustainability of fees, nature and type of portfolio company investments, ability to realize carried interest entitlements and dependence on key personnel. Other factors, such as general economic conditions, including exchange rate fluctuations, may also have an effect on GMP's results of operations. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. For a description of risks that could cause our actual results to materially differ from our current expectations, please see the "Risk Management" section in GMP's 2009 Annual MD&A and "Risk Factors" in GMP's annual information form dated March 1, 2010. Material factors or assumptions that were applied to drawing a conclusion or making an estimate set out in the forward-looking information include: recent positive economic indicators of an improved pace of economic and business activity; improving liquidity and credit market conditions; lower equity market volatility, increased investor confidence and rising equity market valuations in connection with the level of public offerings, M&A activities and securities trading; a low interest rate environment; positive signs of economic stabilization in the United States and emerging markets resulting in increased demand for Canadian exports; and a strengthening Canadian dollar relative to the United States dollar. For other factors or assumptions applied see the "Business Environment and Market Outlook - Market Outlook" section included in GMP's 2009 Annual MD&A. Although forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements included in this press release may be considered "financial outlook" for purposes of applicable Canadian securities laws, and as such the financial outlook may not be appropriate for purposes other than this press release. The forward-looking statements contained in this press release are made as of the date of this press release, and should not be relied upon as representing GMP's views as of any date subsequent to the date of this press release.
SOURCE GMP Capital Inc.
For further information: For further information: GMP Capital Inc., Rocco Colella, Director, Investor Relations, 145 King Street West, Suite 300, Toronto, Ontario, M5H 1J8, Tel: (416) 941-0894, Fax: (416) 943-6175, firstname.lastname@example.org or email@example.com