Coast Wholesale Appliances Income Fund

Coast Wholesale Appliances Income Fund

May 05, 2010 18:55 ET

Coast Wholesale Appliances Income Fund Announces Agreement to Convert to a Corporation by January 1, 2011

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 5, 2010) -


Coast Wholesale Appliances Income Fund (the "Fund") (TSX:CWA.UN) today announced that it has entered into an agreement to convert from an income trust structure to a publicly traded corporation by January 1, 2011 (the "Arrangement").

In order to effect the conversion, the Fund has signed a definitive agreement (the "Arrangement Agreement") with various parties, including Coast Wholesale Appliances Inc. ("Coast Inc."), a newly incorporated company, whereby Coast Inc. will become the new public entity after the completion of the Arrangement. The Fund has met with the Toronto Stock Exchange (the "TSX") and will file an application with the TSX for the listing of the common shares of Coast Inc. on the TSX under the symbol "CWA" once the Arrangement is completed. The listing of the common shares of Coast Inc. on the TSX is subject to the ability of the Fund and Coast Inc. to satisfy all of the listing conditions of the TSX.

The Arrangement will occur pursuant to a statutory plan of arrangement under Section 192 of the Canada Business Corporations Act. The details of the Arrangement are further described in the Notice of Annual and Special Meeting of unitholders of the Fund ("Unitholders") and the Management Information Circular to be sent to Unitholders in the weeks ahead in connection with the conversion and other matters to be considered at the annual and special meeting (the "Meeting") of Unitholders and other Fund securityholders. The Meeting will be held on June 23, 2010 at 10:00 a.m. (Pacific time) at the Metropolitan Hotel, 645 Howe Street, Vancouver, British Columbia. The record date for determining Unitholders entitled to vote on the Arrangement is May 12, 2010.

"The Board of Trustees is of the view that the Arrangement will result in a simplified business structure and come with a number of benefits, including removing the limitations upon foreign ownership of Coast's securities and removing restrictions on the ability of Coast to raise additional capital in the event that opportunities present themselves," said Ken Crump, Chairman of the Fund.

Pursuant to the Arrangement, Unitholders will receive, for each unit of the Fund held, one share of Coast Inc. CWAL Investments Ltd. ("CWAL"), the previous owner of the Coast business, will receive, for each combined exchangeable unit of Coast Wholesale Appliances LP and special voting unit of the Fund held, one share of Coast Inc.

The Arrangement is subject to, among other customary conditions, approval by the Supreme Court of British Columbia, the approval of the TSX and a positive vote in favour of the Arrangement by at least 66 2/3% of the votes cast by all securityholders of the Fund voting as a single class.

As a signatory to the Arrangement Agreement, CWAL has agreed to vote its Fund securities in favour of the Arrangement. Furthermore, Coast trustees and officers have advised the Fund that they intend to vote their individual securities in favour of the Arrangement.

The Board of Trustees of the Fund, based upon its own investigations, on information provided by management of the Fund and on the advice of legal counsel of the Fund, has unanimously concluded that the Arrangement is fair to Unitholders and is in the best interests of Coast and its Unitholders, and recommends that Unitholders vote in favour of the Arrangement.

Unitholders are expected to receive their regular monthly cash distribution of $0.04167 per unit, subject to any additional special distributions as determined by the Board, up to the November 2010 distribution payable on December 15, 2010.

If the Arrangement is approved at the Meeting and the effective date of the Arrangement occurs on or about January 1, 2011, as currently scheduled, it is anticipated that Coast Inc. will adopt a dividend policy whereby it will initially pay a monthly dividend approximately equal to 50% of its net income. Management expects the amount of the monthly dividend to be $0.035 ($0.42 per annum) per share of Coast Inc. Provided the Arrangement is approved at the Meeting and the Arrangement is completed on January 1, 2011, the first monthly dividend is anticipated to be declared in respect of the month ended January 31, 2011.

Coast Inc.'s dividend policy will be subject to the discretion of the board of directors of Coast Inc. who will take into account Coast Inc.'s financial performance and its current and anticipated business needs at the time a dividend is being considered. The amounts and time of any future dividends by Coast Inc. may vary depending on, among other things, Coast Inc.'s earnings, financial requirements, the satisfaction of solvency tests imposed by the Canada Business Corporations Act for the declaration of dividends and other relevant factors.

Mr. Crump has announced to the Board his intention to step down as a board member after the June 23, 2010 meeting due to other commitments. "I am pleased with the progress made since 2006 when I joined the Board and look forward to Coast embarking on the next chapter of its development," said Mr. Crump. Patrick Dennett, a Trustee of the Fund, added, "The Board thanks Mr. Crump for his significant efforts and expects to name his replacement by the Meeting."

Coast Profile

Coast is a leading independent supplier of major household appliances to developers and builders of multi-family and single-family housing, and to retail customers. Founded in 1978, Coast currently operates 16 stores, with 15 locations across the four western provinces and one store in the Greater Toronto Area.

Forward-looking Statements

This news release includes forward-looking statements. These involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "estimate", "expect", "may", "plan", "will", and similar terms and phrases, including references to assumptions. Such statements may involve, but are not limited to, comments with respect to the completion of the conversion of the Fund from an income trust structure to a publicly traded corporation and the level and sustainability of the Fund's distributions and Coast Inc.'s dividends in the future.

These forward-looking statements reflect current expectations of the Fund's management regarding future events and operating performance as of the date of this news release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to: sensitivity to general economic conditions; maintenance of profitability and management of growth; competition; changes in consumer preferences; changes in the mix of product sales; fluctuations in fuel and commodity pricing, which may impact freight and other costs; usage of extended warranty programs and the costs to deliver these services; changes to planning and supply chain processes; reliance on suppliers; lack of supplier agreements; reliance on key personnel; foreign exchange rates as they relate to imported products; and interest rates.

Although the forward-looking statements contained in this news release are based upon what management believes to be reasonable assumptions, the Fund cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements reflect management's current beliefs and are based on information currently available to the Fund. They speak only as of the date of this news release, and reflect current assumptions regarding future events and operating performance. These assumptions include, without limitation: modest economic growth in 2010 in both Western Canada and the Greater Toronto Area (Coast's current market areas); continued fluctuations in exchange rates; low but slowly increasing interest rates through 2010; improved but still cautious credit markets for its major builder customers to obtain financing for their current and future building activities; a continued, gradual improvement in consumer confidence as the economy recovers, reflected in increasing retail sales of major household appliances; and a continuation of the recent resurgence of new home construction activity, reflected in higher levels of new building permits issued and housing starts compared to last year. These forward-looking statements are made only as of the date of this news release and the Fund assumes no obligation to update or revise them to reflect new events or circumstances, other than as required by law.

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