Mullen Group Income Fund announces intention to convert to corporation, 2009 distributions and 2009 capital budget



    OKOTOKS, AB, Jan. 13 /CNW/ - (TSX-MTL.UN) Mullen Group Income Fund
("Mullen" or the "Fund") announced today its intention to convert from an
income trust to a growth-orientated corporation (the "Conversion"). This
decision follows a review of the restructuring alternatives available to the
Fund, as first announced on January 28, 2008.
    "On October 31, 2006 when the Federal Government announced its intention
to effectively eliminate the income trust structure, we knew that the day
would come when we would be forced to convert. Today we announced that a
Conversion in 2009 is in the best interests of Mullen and our
securityholders," stated Mr. Murray K. Mullen, Chairman and Chief Executive
Officer.
    "Not only are we facing a deadline to convert, we are in the midst of a
seizure in the credit markets, a severe global slowdown and a dramatic decline
in crude oil and natural gas pricing. Within this context we believe that a
Conversion at this time is prudent. More importantly, we remain committed to
our strategic plan of growth through acquisition in the two areas of the
economy that we have developed a deep understanding and industry leadership -
the oil and natural gas service industry and the trucking and logistics sector
in North America. The Conversion will provide our management team with the
best opportunity to deliver long-term capital growth and a reliable cash
yield," added Mr. Mullen.
    A conference call and webcast will be held on Wednesday, January 14,
2009, as further outlined at the end of this News Release.

    
    2008 Preliminary Results
    ------------------------
    

    Although the Fund has not finalized its fourth quarter or 2008 year-end
financials, indications are that 2008 will be a record year from an operating
perspective. The Fund anticipates generating operating income of approximately
$75.0 million on consolidated revenue of approximately $350.0 million for the
fourth quarter of 2008 and operating income of approximately $270.0 million on
consolidated revenue of approximately $1.3 billion for the 2008 year. These
anticipated 2008 year-end results are a substantial improvement over 2007 when
the Fund generated operating income of $209.1 million on consolidated revenue
of $1.1 billion. This year over year improvement can be attributed to a number
of factors, including:

    
    -   the Fund's acquisition in 2008 of the Transport Division of Essential
        Energy Services Trust and of R.E. Line Trucking;

    -   the strong demand for services related to the transportation of
        fluids and servicing of oil wells;

    -   the strong demand for specialized services related to the build out
        and servicing of projects related to the extraction of oilsands
        deposits;

    -   the strong performance by the Trucking/Logistics segment; and

    -   the Fund's efforts to monitor and control costs.
    

    "We will remember 2008 as the year the Fund generated record results at a
time when we were inundated with negative economic news, especially in the
last half of the year. These results evidence the strength and diversity of
our business model and confirm that our strategy of focusing on the energy
sector in western Canada and growth through acquisition will be successful
over the long-term," stated Mr. Stephen H. Lockwood, President and Co-Chief
Executive Officer.
    The Fund also announced that it has initiated its annual assessment of
goodwill and intangibles to determine whether as a result of the current
economic climate the goodwill it booked in 2006 in connection with its
oilfield services acquisitions has been further impaired. A goodwill
impairment of $250.0 million was recognized at the 2007 year-end and a further
impairment may be required for the 2008 year-end. The amount of such
impairment, if any, will be announced when the Fund releases its 2008 audited
financial statements, which is expected to occur near the end of February,
2009. In relation to the Fund's long-term debt, the Fund expects to recognize
an unrealized loss on foreign exchange of approximately $42.0 million for the
fourth quarter of 2008 resulting in an unrealized foreign exchange loss for
2008 of approximately $54.0 million. These unrealized losses are due to the
impact of the change over the quarter and over the year in the value of the
CDN dollar relative to the US dollar on the Fund's $235.0 million of US dollar
denominated long-term debt. The Fund does not expect these unrealized foreign
exchange losses to have negative consequences on the Fund's operations.

    
    Rationale for Conversion
    ------------------------
    

    "Over the years we have prudently managed our growth within the context
of maintaining a strong balance sheet. Today we have a business that generates
over $1.3 billion in annual revenues and significant operating earnings that
we expect will reach approximately $270.0 million in 2008. Our business model
is strong and we will continue to work hard to maintain what we have built.
However, we are acutely aware that the world has changed. The credit crisis
that we have been concerned about for over a year now, will impact our
customers, our competitors and our business. As such we must be positioned to
adapt to all challenges and opportunities. It is my view and that of the Board
that the income trust model is not the best structure for Mullen on a go
forward basis," stated Mr. Mullen.
    In a News Release on January 28, 2008, the Fund expressed a concern that
the Federal government's legislation concerning SIFT's would limit the Fund's
access to capital and result in the demise of the trust structure as a viable
business model. As a result of these concerns, the Fund indicated it would be
investigating the potential restructuring alternatives available to it well in
advance of 2011 to ensure the Fund's structure was viable and sustainable over
the long-term as well as effective and efficient in allowing for growth,
capital appreciation and a cash yield for securityholders.
    During the past year the Fund has been investigating and considering
various restructuring alternatives available to it and has been considering
the Fund's strategic objectives, to ensure that the Fund has the most
appropriate structure for its long-term viability and sustainability. As a
result of these investigations and discussions, the Board believes that
conversion to a corporate structure at this time will best enable Mullen to
execute its strategic plan and thereby deliver strong growth and capital
appreciation for our securityholders over the long-term. The Board feels that
the Conversion should be undertaken at this time since: the federal
government's SIFT rules have destroyed the long-term viability of the trust
structure; the current credit crisis has created uncertainty in the markets;
and in the current economic times the Fund's financial flexibility is now
limited due to its commitment as an income trust to distribute a large portion
of its cash flow.
    After the Conversion, Mullen intends to utilize its free cash flow to
reduce its credit facility which currently stands at approximately $65.0
million and to fund potential acquisition opportunities.

    
    Recommendation of the Board
    ---------------------------
    

    The Board, based on its review, has unanimously approved the proposed
Conversion. The Board has concluded that the Conversion is in the best
interests of Mullen and its holders of trust units of Mullen and Class "B"
units of MCLP (collectively, "Securityholders") and unanimously recommends
that Securityholders vote their trust units and MCLP "B" units in favour of
the Conversion.

    
    Mechanics of the Reorganization
    -------------------------------
    

    It is contemplated that the Conversion will be undertaken pursuant to a
plan of arrangement under the Business Corporations Act (Alberta). The
Securityholders will receive one common share of a newly formed corporation
("New Mullen") for each trust unit of Mullen or Class "B" unit of MCLP. The
final result of the Conversion will be that New Mullen will have approximately
80.6 million issued and outstanding common shares. The Conversion is intended
to be tax-deferred for all Securityholders for Canadian income tax purposes,
although individuals holding Mullen trust units may be able to elect to treat
the Conversion as a taxable event for Canadian income tax purposes.
    The Conversion is subject to receipt of all required approvals, including
court, stock exchange, regulatory and bank and approval by at least 66 2/3
percent of the votes cast by Securityholders of Mullen, voting together as a
single class.
    A management proxy circular will be mailed to Securityholders in late
March in connection with the Conversion and other matters to be considered at
an annual and special meeting of the Fund to be held in late April 2009. The
Fund expects, subject to receipt of required approvals, that the Conversion
will be effective on May 1, 2009.
    It is a condition of the completion of the Conversion that the common
shares of New Mullen be listed with the Toronto Stock Exchange (the "TSX").
Mullen will seek the delisting of its trust units from the TSX upon completion
of the Conversion.

    
    Support Agreements
    ------------------
    

    Each of the officers and directors of the Fund, who together beneficially
own an aggregate of approximately 11.0 percent of the Fund's trust units and
MCLP Class "B" units have indicated they will sign support agreements with the
Fund under which they will agree to vote in favour of the Conversion. The
Conversion will not trigger any change of control provisions in any employment
contracts.

    
    2009 Distributions and Dividends
    --------------------------------
    

    In light of the uncertain economic times and the Fund's intention to
convert from an income trust to a corporation, the Fund intends to reduce its
distribution to $0.075 per unit per month for the months of January, February
and March 2009 and then end distributions as an income trust.
    "Mullen's conversion to an income trust in July of 2005 has been very
beneficial to the Fund and its Securityholders. The organization's revenue and
operating income have grown significantly and the operations have been further
diversified. In addition, the Fund will have distributed a total of
approximately $472.0 million or $6.43 per unit by the time of Conversion. As a
result of the uncertainly that exists in the marketplace today we felt it was
prudent to reduce our distribution to $0.075 commencing with January of 2009,"
stated Mr. Lockwood.
    Once the Conversion has been approved, Mullen intends to establish a
dividend policy under which it will initially declare annual dividends of
$0.50 per share to be paid quarterly. The first dividend of $0.125 is expected
to be announced in mid September 2009 and payable for the period ending
September 30, 2009.
    "Prior to Mullen's conversion to an income trust it was paying an annual
dividend of $0.50 per share, which equates to approximately $0.1733 per share
after taking into account the three for one stock split that occurred in July
of 2005. We are very pleased that the diversified businesses we have today
should be able to support an initial annual dividend of $0.50 and feel this is
an appropriate initial dividend under the circumstances. As we move through
2009 and 2010 the level of dividend will be reassessed based on the operating
performance of our business and the overall economic climate," stated Mr.
Lockwood.

    
    2009 Outlook
    ------------
    

    The current economic climate will make operating in 2009 very
challenging. Sometime ago Mullen implemented a number of measures throughout
its organization to prepare it for these difficult times, including a hiring
freeze on salaried positions, a rigid and centralized capital expenditure
approval process, a suspension of its profit-share program and a wage freeze.
In addition, all discretionary expenditures are being scrutinized and all
employees have been challenged to find operational efficiencies.
    "We feel it is incumbent on all our stakeholders to share in these
challenging economic times. Our Securityholders have seen a material decrease
in the value of their investment and will see a material decrease in their
distributions in 2009. Our employees will also be sharing in the pain in 2009
through the wage freeze, hiring freeze and suspension of our profit-share
program. Although it appears that the operating environment in 2009 will be
much more difficult than 2008, it is our intention to continue to operate
profitably and at the same time protect the jobs of as many of our people as
reasonably possible," said Mr. Mullen.

    
    2009 Capital Budget
    -------------------
    

    The Fund also announced today that it has approved a $25.0 million
capital expenditure budget for 2009. This amount will be allocated to those
business units in the Fund that have attractive growth opportunities which
will generate high returns on capital employed. Additional capital would be
required to fund acquisitions the Fund identifies and the acquisition of
long-term assets such as land and buildings.

    
    Conference Call
    ---------------
    

    A conference call and webcast will be held for investors, financial
analysts and other interested parties on Wednesday, January 14, 2009, at 10:30
a.m., Calgary time, to discuss the Conversion and the other matters outlined
in this News Release.
    To listen to this Webcast and Conference Call event, please enter
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2520980 in your web
browser.
    To participate in the live conference call please dial either
416-644-3417 or 1-800-595-8550. A replay of the call will be available until
Friday, January 23, 2009 at 11:59 p.m. MT. To access the replay please dial
either 416-640-1917 or 1-877-289-8525 and enter the passcode 21294551 followed
by the pound sign.

    This press release contains forward-looking statements and
forward-looking information within the meaning of applicable securities laws.
The use of any of the words "expect", "anticipate", "continue", "objective",
"will", "should", "believe", "plans", "intends" and similar expressions are
intended to identify forward-looking information or statements. More
particularly and without limitation, this press release contains forward
looking statements and information concerning operating income; revenue;
goodwill impairment; foreign exchange losses; access to capital; anticipated
benefits from the Conversion; future cash flow and utilization of cash flow;
debt levels; capital investment and expenditure programs and the funding
thereof; statements with respect to levels of distributions and dividends to
be paid to securityholders, dividend policy, and the timing of payment of such
distributions and dividends.
    The forward-looking statements and information are based on certain key
expectations and assumptions made by Mullen, including expectations and
assumptions concerning general economic conditions, including commodity prices
and exchange rates; the timing of receipt of regulatory, securityholder and
other approvals; and the sufficiency of budgeted capital expenditures in
carrying out planned activities. Although Mullen believe that the expectations
and assumptions on which such forward-looking statements and information are
based are reasonable, undue reliance should not be placed on the forward
looking statements and information because Mullen can give no assurance that
they will prove to be correct.
    Since forward-looking statements and information address future events
and conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those currently
anticipated due to a number of factors and risks. These include, but are not
limited to, the risks associated with the service and energy industry in
general; ability to access sufficient capital from internal and external
sources; failure to obtain required regulatory, securityholder and other
approvals; and changes in legislation, including but not limited to tax laws
and environmental regulations. There are risks also inherent in the nature of
the proposed Conversion, including failure to obtain the required
securityholder, court, regulatory and other third party approvals. This press
release also contains forward-looking statements and information concerning
the anticipated completion of the proposed Conversion and the anticipated
timing for completion of the Conversion. Mullen has provided these anticipated
times in reliance on certain assumptions that they believe are reasonable at
this time, including assumptions as to the time required to prepare meeting
materials for mailing, the timing of receipt of the necessary court,
regulatory and other third party approvals and the time necessary to satisfy
the conditions to the closing of the Conversion. These dates may change for a
number of reasons, including unforeseen delays in preparing meeting materials,
inability to secure necessary court, regulatory or other third party approvals
in the time assumed or the need for additional time to satisfy the conditions
to the completion of the Conversion. Accordingly, readers should not place
undue reliance on the forward-looking statements and information contained in
this press release concerning these times.
    Readers are cautioned that the foregoing list of factors is not
exhaustive. Additional information on these and other factors that could
affect the operations or financial results of Mullen or New Mullen are
included in reports on file with applicable securities regulatory authorities
and may be accessed through the SEDAR website (www.sedar.com). The
forward-looking statements and information contained in this press release are
made as of the date hereof and Mullen undertake no obligation to update
publicly or revise any forward-looking statements or information, whether as a
result of new information, future events or otherwise, unless so required by
applicable securities law. The Fund relies on litigation protection for
"forward-looking" statements.

    Mullen is an open-ended income fund that owns a network of independently
operated businesses. Today the Mullen Group is recognized as the largest
provider of specialized transportation and related services to the oil and
natural gas industry in western Canada and as one of the leading suppliers of
trucking and logistics services in Canada - two sectors of the economy in
which the Fund has strong business relationships and industry leadership.
Administration of the Fund is delegated to Mullen Group Inc. which, in
addition to managing the Fund, provides management and financial expertise,
technology and systems support to its independent businesses.
    Mullen is a publicly traded income trust listed on the Toronto Stock
Exchange under the symbol "MTL.UN". Additional information is available on our
website at www.mullen-group.com.

    %SEDAR: 00022408E




For further information:

For further information: Mr. Murray K. Mullen - Chairman and Chief
Executive Officer; Mr. Stephen H. Lockwood - President and Co-Chief Executive
Officer; 121A, 31 Southridge Drive, Okotoks, Alberta, Canada, T1S 2N3, Tel:
(403) 995-5200, Fax: (403) 995-5296

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Mullen Group Ltd.

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