TORONTO, Sept. 20, 2012 /CNW/ - Counsel Corporation ("Counsel" or the "Company") (TSX: CXS), a financial services company, announced today that it intends to end its management contract (the "Management Agreement") with real estate finance company Terra Firma Capital Corporation ("Terra Firma") (TSX-V: TII), effective December 31, 2012. The Company also announced it plans to distribute the 6,138,333 shares of Terra Firma that it owns to shareholders of Counsel (the "Special Distribution"), with payment expected to occur in January 2013.
"Counsel's decision to end its management of Terra Firma is consistent with our strategy to focus on our key operating business platforms, including our residential mortgage lending business Street Capital Financial and our capital asset solutions business Counsel RB Capital," said Allan Silber, Chairman and CEO of Counsel. "We believe that Terra Firma is well prepared to continue operating successfully, independent of Counsel."
Terra Firma provides customized equity and debt solutions to the real estate industry. Counsel, which has a successful history in real estate finance, took the initiative to found and organize Terra Firma and has been its manager since it commenced commercial operations in 2008. Terra Firma's loan portfolio has increased to $28.8 million (with a weighted average effective interest rate of 19.3%) as at June 30, 2012 and it recorded net income of $0.5 million in the first half of 2012 versus $0.1 million in the same period of 2011.
"We are very proud of the management team that we have assembled for Terra Firma," said Mr. Silber. "We believe they will continue building a strong and highly profitable real estate finance company. We are also pleased that, through our special distribution of Terra Firma shares, Counsel shareholders will be able to benefit from a direct stake in the company's success."
Counsel owns approximately 20.2% of the outstanding common shares of Terra Firma. Following the completion of the Special Distribution, Counsel would no longer hold any Terra Firma shares. Counsel has not yet formally declared a dividend of its Terra Firma shares. Details of a record date and payment date for the Special Distribution will be announced after the Board of Directors of Counsel formally declares a dividend.
Terra Firma is managed by Counsel Asset Management, L.P., a wholly owned subsidiary of Counsel. Under the Management Agreement, the services provided included the management of the day-to-day operations of Terra Firma, advice on strategic matters, as well as other general management services. The Management Agreement can be terminated by either company upon 90 days' written notice. Pursuant to the Management Agreement, Counsel receives an annual management fee, per a predetermined calculation. The terms of the agreement also provide for the participation by Counsel in certain fees paid for prescribed services in connection with mezzanine lending, equity participations in commercial and residential developments and investment property acquisitions.
About Counsel Corporation (www.counselcorp.com)
Counsel Corporation (TSX: CXS) is a financial services company that operates through its individually branded businesses in residential mortgage lending, distressed and surplus capital asset transactions, and private equity investment.
The statements made in this release that are not historical facts contain forward-looking information that involves risks and uncertainties. All statements, other than statements of historical facts, which address CounselCorporation's expectations, should be considered as forward-looking statements. Such statements are based on knowledge of the environment in which Counsel Corporation currently operates, but because of the factors listed herein, as well as other factors beyond Counsel Corporation's control, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that may cause actual results to differ from anticipated results include, but are not limited to, obtaining necessary approvals and other risks detailed from time to time in the Company's securities and other regulatory filings.
SOURCE: Counsel Corporation
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