Chesswood Income Fund

Chesswood Income Fund

August 01, 2008 09:00 ET

Chesswood Income Fund Announces Amendments to Previously Issued Convertible Debentures

TORONTO, ONTARIO--(Marketwire - Aug. 1, 2008) - Chesswood Income Fund (the "Fund") (TSX:CHW.UN) announces that the Toronto Stock Exchange has pre-cleared the Fund's proposal to amend the terms of the Fund's currently issued and outstanding $3.5 million principal amount of convertible debentures (the "Debentures").

The Debentures were issued by the Fund in exchange for convertible debentures in the same principal amount issued by cars4ULtd. (the entity the Fund was created to indirectly acquire) on February 10, 2003. The Debentures were initially due on August 10, 2007 and have since been extended to August 10, 2008. Trustees of the Fund and/or directors of Chesswood GP Limited hold $2.1 million of the Debentures. The Debentures, which themselves are not listed on an exchange, are convertible into units of the Fund ("Units").

Specifically, the Fund is proposing to:

(a) extend the maturity date from August 10, 2008 to January 31, 2011;

(b) change the prepayment bonus (a right the Fund currently has) such that the Fund would have the right to prepay the Debentures (in whole or in part) prior to the extended maturity date of January 31, 2011. In addition, the Fund would offer a sliding scale 9% prepayment bonus on any prepayments prior to August 10, 2009. Under these bonus arrangements, the bonus percentage would initially be 9% and reduce at the rate of 0.75% per expired month prior to the prepayment;

(c) add a provision obligating the Fund to make offers to purchase the Debentures (at a price of the principal amount plus accrued interest) upon a change of control of the Fund;

(d) reduce the conversion price to $3.50 (from $15.58) per Unit to better reflect current market prices. An additional 775,354 Units could be issued by the Fund as a result of such reduction;

(e) add a provision stipulating that the Debentures will not be convertible until January 1, 2009;

(f) instead of automatic conversion, provide that the Fund shall have the option to convert the Debentures if the weighted average trading price of the Units on the TSX for a 20 trading day period at any time from and after January 1, 2009 exceeds 125% of the conversion price and certain other conditions are met. The holders' option to convert would continue, but such option would only be available from and after January 1, 2009 at the new reduced conversion price of $3.50; and

(g) change the timing of interest payments such that they are paid monthly instead of quarterly.

Amended and restated debentures will be issued to those holders of Debentures who accept and agree to the proposed amendments. If a holder does not accept and agree to the proposed amendments, such Debentures will be redeemed on August 10, 2008. The Fund will issue a press release following August 10, 2008 announcing the principal amount redeemed and the principal amount of amended Debentures outstanding.

About Chesswood Income Fund

The Fund is a financial services trust with operating businesses in both Canada and the U.S.

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This press release contains forward-looking statements that involve a number of risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Many factors could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.


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