Toronto Stock Exchange: VIC.UN
OAKVILLE, ON, May 12, 2010 /CNW/ - Vicwest Income Fund (the "Fund" and on a consolidated basis, "Vicwest") (TSX VIC.UN) today announced its plans to seek unitholder approval to convert from an income trust into a corporation effective on or about January 1, 2011. This reorganization is being initiated as a result of the federal government's announcement in October 2006 that changed the way income trusts, such as the Fund, are to be taxed.
Benefits of Conversion
The Trustees and management of Vicwest Income Fund believe that the proposed conversion of the Fund's capital structure is in the best interests of Vicwest and its stakeholders, and believe the conversion can be expected to provide several important benefits:
- A corporate structure that is expected to attract new investors and
provide a more liquid trading market for Vicwest securities;
- Enhanced access to capital markets which will benefit the business as
it continues to expand through acquisitions;
- A flexible structure that will allow Vicwest to retain more of its
cash flow and continue to grow the business; and
- The taxes payable by Vicwest as a corporation after this year for
undistributed amounts will be lower than in a trust structure,
thereby improving funds available for business operations and growth.
"The proposed conversion and distribution changes are necessary steps for us to take in response to the taxation of the Fund, and other income trusts, effective January 1, 2011," said Colin Osborne, President and Chief Executive Officer. "Since we became an income fund in June 2005, Vicwest has consistently met its objectives of delivering stable distributions to unitholders, while continuing to improve financial results and grow in strategic markets and products. As we take this next step in our company's evolution, we are well positioned to continue its growth, deliver solid financial results and support yield and capital appreciation for our owners over the long term."
The Fund also announced its intention to pay quarterly dividends, commencing in 2011, at an initial annualized rate of $1.08 per share. This intended level of distribution represents an adjustment to the current annualized rate of $1.56 per unit for the anticipated tax on this amount of distributable pre-tax income that the business will be subject to commencing in 2011. Provided the conversion is approved, dividends made by Vicwest beginning in 2011 will be taxed as dividends rather than regular income, as they are today. Certain investors may be entitled to dividend tax credits which would enhance after-tax yield and significantly reduce the after-tax impact of the reduction in distributions.
The Fund intends to maintain its current distributions at $1.56 per unit annualized ($0.13 per unit monthly) for the remainder of 2010.
In determining actual distribution and dividend levels, the board will consider the financial performance, capital plans, acquisition opportunities, expectations of future economic conditions and other factors. Distribution and dividend amounts are subject to the risk factors described herein and in the Fund's public disclosures.
Unitholders will be asked to approve the proposed conversion plan at a special meeting of the unitholders to be held later this year. Implementation of the conversion is expected to occur by way of a plan of arrangement and will be subject to approval by not less than 66 2/3% of the votes cast at the special meeting as well as customary conditions, including the receipt of applicable regulatory, legal and TSX approvals. Upon completion of the conversion, it is expected that unitholders will receive, on a tax deferred roll-over basis, one share of the resulting public corporation for each Fund unit held. Details of the conversion process and substance, and of the consequences of same, will be disclosed in detail in a circular to be prepared and distributed in connection with the special meeting.
About Vicwest Income Fund
The Fund is one of Canada's leading manufacturers and distributors of building construction products, and steel containment products for agricultural grain, fertilizer and liquid storage. Through its Vicwest building products division, headquartered in Oakville, Ontario, the Fund fabricates and markets metal roofing, siding and other associated building products under the Vicwest, Mercury Metals, Valley Truss & Metal and RCA Metal trade names. The Fund's Westeel Storage Solutions division, headquartered in Winnipeg, Manitoba, manufactures storage solutions for agricultural grain and fertilizer, as well as liquid storage tanks and accessories. These products are manufactured and distributed under the trade names Westeel, Northern Steel Industries and NSI. The Fund has 15 manufacturing facilities strategically located across Canada with approximately 1,200 dedicated employees committed to providing superior quality products and delivering excellent service to customers in domestic and international markets.
Certain statements in this press release constitute forward-looking statements within the meaning of applicable securities laws, including statements concerning the Fund's intention to convert and its intended post-conversion distribution plans. 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. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include the cyclical nature of the construction and agriculture industries, changes in general economic conditions and interest rates, adverse weather, cost and availability of materials used to manufacture the Fund's products. Other risks include, but are not limited to reductions in demand for the Fund's products, competition, management of the Fund's information, foreign exchange, labour availability and collective bargaining agreements, income tax matters, customer concentration, relationship with suppliers, product liability, capital and liquidity, collections from customers, operating hazards, uninsured risks, supply and install contracts, interest rates, distribution arrangements, lack of long-term agreements, pension funding, future legal proceedings, dependence on key personnel, limitations on growth, environment, climate change, risk of securities laws compliance and corporate governance changes, tax law changes, and other risk factors included in the most recently filed Management's Discussion and analysis under the heading "Risks and Uncertainties" and as described from time to time in the reports and disclosure documents filed by the Fund with Canadian securities regulatory agencies and commissions. This list is not exhaustive of the factors that may impact the Fund's forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Fund's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Fund nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The factors underlying current expectations are dynamic and subject to change. Although the 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 securities laws, and such financial outlook may not be appropriate for purposes other than this press release. All forward-looking statements in this press release are qualified by these cautionary statements. The forward-looking statements contained herein are made as of the date of this press release and except as required by applicable law, the Fund undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
SOURCE Vicwest Inc.
For further information: For further information: Colin Osborne, President & Chief Executive Officer, Vicwest Income Fund, Tel: (905) 469-5700, Fax: (905) 825-1090; John Slattery, Executive VP & Chief Financial Officer, Vicwest Income Fund, Tel: (905) 469-5706, Fax: (905) 825-1090