TRADING SYMBOL: Toronto Stock Exchange - HWD.UN
LANGLEY, BC, June 24 /CNW/ - Hardwoods Distribution Income Fund (the
"Fund") today announced an amendment to the terms of its U.S. credit facility.
The credit facility is available to the Fund's U.S. operating subsidiary,
Hardwoods Speciality Products USLP ("Hardwoods USLP").
- For the 18 month period June 30, 2009 to December 31, 2010,
Hardwoods USLP's Fixed Charge Coverage Ratio ("FCCR") covenant is
removed. Instead, during this time period Hardwoods USLP's only
financial covenant shall be to achieve a minimum trailing EBITDA
- For the nine month period January 1, 2011 to the credit facility's
maturity on September 30, 2011, Hardwoods USLP's only financial
covenant shall be to maintain a FCCR of not less than 1.00. The
FCCR will be calculated on a trailing-twelve-month basis as
(EBITDA - capital expenditures - cash taxes) / (interest expenses
- Throughout all periods described above, the financial covenants
will only be applicable in the event that Hardwoods USLP's unused
credit availability falls below US$4 million. Hardwoods USLP's
unused credit availability is currently above this US$4 million
- At the request of Hardwoods USLP, the maximum borrowings permitted
under the credit facility was reduced from US$30 million to US$25
million. It is estimated that this reduction will result in a
savings in annual interest charges of US$37,500
- The amendment permits borrowings up to 85% of the book value of
certain eligible accounts receivable and up to 50% of the book
value of eligible inventory (reduced from 55% previously)
- Interest will be calculated at a rate of prime plus 3.0% on prime
rate loans, and LIBOR plus 4.5% on LIBOR revolver loans. These
rate spreads are approximately 225 basis points higher than
Hardwoods USLP was paying immediately prior to entering into the
amendment. Based upon current interest rates, Hardwoods USLP's
cost of borrowing will now be 6.25% under prime rate loans, and
5.5% under LIBOR based loans.
"We are pleased to have completed this amendment with our U.S. lender,"
commented Maurice Paquette, Hardwoods' President and CEO. "Although we will be
paying a higher interest rate going forward, the financing rates achieved are
competitive within the current credit environment. We believe the revised
covenant package will benefit our U.S. business, providing greater financial
flexibility as we work through the current uncertain economic environment."
The description of the U.S. credit facility amendment set out above is
qualified in its entirety by the Amendment Number Two to the Loan and Security
Agreement, a copy of which will be filed at www.sedar.com.
About the Fund
Hardwoods Distribution Income Fund is an unincorporated, open-ended,
limited purpose trust established to hold, indirectly, an 80% interest in the
securities of Hardwoods Specialty Products LP and Hardwoods Specialty Products
USLP. The Fund was launched on March 23, 2004, with the completion of an
initial public offering of 14,410,000 units.
Hardwoods is one of North America's largest distributors of high-grade
hardwood lumber and sheet goods to the cabinet, moulding, millwork, furniture
and specialty wood products industries. Hardwoods operates 27 distribution
centres in the U.S. and Canada.
Certain statements in this press release contain forward-looking
information within the meaning of applicable securities laws in Canada
("forward-looking information"). The words "anticipates", "believes",
"budgets", "could", "estimates", "expects", "forecasts", "intends", "may",
"might", "plans", "projects", "schedule", "should", "will", "would" and
similar expressions are often intended to identify forward-looking
information, although not all forward-looking information contains these
The forward-looking information in this press release includes, but is
not limited to: the financing rates achieved are competitive within the
current credit environment; and the revised covenant package will benefit our
U.S. business, providing greater financial flexibility as we work through the
current uncertain economic environment.
The forward-looking information is subject to risks, uncertainties and
other factors that could cause actual results to differ materially from
historical results or results anticipated by the forward-looking information.
The factors which could cause results to differ from current expectations
include, but are not limited to: the financing rates achieved are not
competitive in the current or future credit environment and this adversely
impacts upon our financial results; the revised covenant package does not
provide us with greater or adequate financial flexibility to work through the
current uncertain economic environment, and that as a result, Hardwoods USLP
does not comply with its financial covenants, and that our lender exercises
their rights and remedies during the continuance of any defaults under the US
credit agreement and that, in such an event, a replacement facility cannot be
obtained in order to permit the repayment of indebtedness under the US credit
agreement, or that, if such a replacement facility is obtained, that it will
not be obtained at costs, or on terms and conditions, comparable to those of
our current US bank indebtedness; and, other risks described in the Fund's
Annual Information Form and other continuous disclosure documents.
All forward-looking information in this press release is qualified in its
entirety by this cautionary statement and, except as may be required by law,
the Fund undertakes no obligation to revise or update any forward-looking
information as a result of new information, future events or otherwise after
the date hereof.
For further information:
For further information: Rob Brown, Chief Financial Officer, Phone:
(604) 881-1990, Fax: (604) 881-1995, Email: email@example.com