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TORONTO, Oct. 30, 2015 /CNW/ - Further to its press release dated October 13, 2015, Onex Credit Partners, LLC (the "Manager"), as the manager of OCP Senior Credit Fund (the "Fund") (TSX: OSL.UN) announces that its forward agreement with The Bank of Nova Scotia (the "Forward Agreement") will expire on November 19, 2015 (the "Termination Date"). Currently the Fund obtains exposure to the portfolio (the "Portfolio") held by OCP Credit Trust (the "Reference Fund") through the Forward Agreement. The Portfolio is comprised primarily of senior secured loans and other senior debt obligations of non-investment grade issuers.
The Income Tax Act (Canada) was amended in December 2013 to implement proposals that were first announced in the March 21, 2013 federal budget regarding the income tax treatment of character conversion transactions (the "Tax Changes"). Under the Tax Changes, the favourable tax treatment of character conversion transactions will be eliminated. After a prescribed date (the "Effective Date"), gains (and losses) realized by a fund under certain forward purchase and sale agreements will be treated as ordinary income (or loss) rather than a capital gain (or capital loss). The Effective Date for the Fund is the Termination Date.
As a result of the Tax Changes, the Forward Agreement will be terminated on or about the Termination Date and the Portfolio will be transferred to and held directly by the Fund. The Manager intends to continue to pursue the Fund's investment strategy directly without the Forward Agreement.
The Fund's investment objectives will be amended on or about November 10, 2015 to remove all references to the use of forward agreements to gain exposure to the Reference Fund, to delete references to "tax-advantaged" and to clarify that the Fund will invest directly in securities similar to those held by the Reference Fund.
The investment objectives of the Fund after the proposed amendments will be (i) to provide unitholders with attractive, quarterly distributions, initially targeted to be $0.125 per quarter, representing an annual yield of 5% based on the original issue price of $10.00 per Unit; (ii) to preserve capital; and (iii) to generate enhanced return through increasing cash flow to the portfolio as interest rates rise.
The amendments to the investment objectives of the Fund are clarifications and will not change the Portfolio unitholders are currently exposed to indirectly through the Reference Fund.
It is expected that the Fund will generate capital gains upon the termination of the Forward Agreement.To the extent the Fund realizes capital gains which exceed its prior distributions, the Fund intends to declare a special capital gains distribution to unitholders of record on December 31, 2015 (the "Special Distribution"). In such circumstances, the Fund intends to pay a portion of the Special Distribution in cash (for payment of all or part of the tax liability of unitholders of the Fund resulting from any such capital gains distribution).
In addition, following the termination of the Forward Agreement, distributions paid by the Fund will be characterized primarily as income for tax purposes to the extent they exceed available non-capital losses of the Fund. The termination of the Forward Agreement will not affect the status of the Fund as a "mutual fund trust" under the Tax Act.
The Manager obtained regulatory approvals and permissions to implement the transaction referred to above on December 3, 2014.
SOURCE Onex Credit Partners, LLC
For further information: OCP Senior Credit Fund, Toronto: 647.260.4055, Toll Free: 1.877.260.4055, www.ocpseniorcredit.com; Onex Credit Partners, LLC, [email protected], 1.201.541.2121