FP Newspapers Income Fund

FP Newspapers Income Fund

December 16, 2009 19:29 ET

FP Newspapers Income Fund Announces Completion of Refinancing of Long Term Debt

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 16, 2009) - The Board of Trustees of FP Newspapers Income Fund (TSX:FP.UN) is pleased to announce that FP Canadian Newspapers Limited Partnership ("FPLP") has signed a credit agreement with HSBC Bank Canada to replace FPLP's current $60 million term loan facility with The Prudential Insurance Company of America. "Completing this re-financing agreement helps to provide stability to allow us to focus on continuing to build the quality of the best daily and community newspapers in Manitoba," said Bob Cox, publisher of the Winnipeg Free Press.

Under the terms of the credit agreement, HSBC will provide two loan facilities totalling $60 million – Facility A in the amount of $50 million, and Facility B in the amount of $10 million, both of which are for a three year term. The facilities will be secured by a charge over all of the assets of FPLP, as well as by an initial cash deposit of $10 million by FPLP and FP Funding Corporation ("FundingCo"). FundingCo is a company controlled by Ronald N. Stern and Robert I. Silver, who together indirectly own 51% of FPLP. The new credit facilities are intended to be drawn down in early January 2010, at which time FPLP and FundingCo will each deposit $5 million in separate guarantee accounts with HSBC.

Based on today's bankers acceptance rates, the total monthly interest cost to FPLP under the new loan facilities (including the cost to FPLP of FundingCo's deposit, which has been established at 3% per annum over the rate charged by HSBC under Facility A) will be lower than under the existing term loan, which reflected market conditions in 2005. However, Facility A will be amortized at a rate of $5 million per year, so the total monthly instalments of principal and interest payable by FPLP will increase on the commencement of the new loan facility. Had the new HSBC loan facilities been in place for 2009, distributable cash attributable to the Fund would have been reduced by approximately $0.03 per unit per month or approximately $0.35 per unit per year.

Distributions during 2010 will reflect the financial results and forecasts for FPLP's business, as well as the amortization of Facility A, and will be subject to a covenant in favour of HSBC to not pay distributions which exceed distributable cash by more than $1 million in any year. All cash received by FP Newspapers Income Fund from FPLP after December 31, 2009, will be by way of distributions on the Class A Units of FPLP held by FPCN Holdings Trust, since a condition of the HSBC credit facility was that the internal subordinated note structure between FPCN Holdings Trust and FPLP be converted entirely to equity (Class A Units of FPLP), as contemplated by the agreements put in place at the time of FP Newspapers Income Fund's initial public offering.

"We're very pleased we've been able to complete this refinancing prior to the June 2010 scheduled maturity of the Prudential notes in a challenging credit market," said Ron Stern, Chief Executive Officer of FPLP. "This new three-year agreement includes initial interest rates lower than we would have paid under the Prudential facility and we believe the de-leveraging is prudent and in the best long-term interest of the business."

Coincident with the changes in FPLP's financing arrangements, and in anticipation of the changes to the tax treatment of income trusts in 2011, the Board of Trustees is also considering the merits of conversion of FP Newspapers Income Fund into a corporation. The Board expects to address this issue at the next annual general meeting of unitholders in the spring of 2010.

FP Canadian Newspapers Limited Partnership owns the Winnipeg Free Press, the Brandon Sun, and their related businesses, as well as the Canstar Community News division, the publisher of seven community and special interest newspapers in the Winnipeg region. The Winnipeg Free Press publishes six days a week for delivery to subscribers and single copy sales, serving Winnipeg and Manitoba with an average Monday through Saturday circulation of approximately 129,000 copies. On Sundays the Winnipeg Free Press publishes a tabloid size newspaper sold through single-copy retail outlets and vending boxes. The Brandon Sun publishes seven days a week, serving the region with an average circulation of approximately 14,600 copies. Canstar Community News publishes weekly with an average circulation of approximately 206,000 copies. Based in Winnipeg, the businesses employ approximately 590 people in Winnipeg and Brandon. Further information can be found at www.fpnewspapers.com, and in the disclosure documents filed by FP Newspapers Income Fund with the securities regulatory authorities available at www.sedar.com.

Contact Information

  • FP Newspapers Income Fund
    Daniel Koshowski
    Vice President, Finance and Administration
    (204) 697-7425
    (204) 632-0281 (FAX)