Canexus Income Fund
TSX : CUS.UN

Canexus Income Fund

August 11, 2009 08:08 ET

Canexus Income Fund Announces $86,000,000 Financing of 8.00% Convertible Unsecured Subordinated Debentures

CALGARY, ALBERTA--(Marketwire - Aug. 11, 2009) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

Canexus Income Fund ("Canexus" or the "Fund")(TSX:CUS.UN) announced today that it has reached an agreement with a syndicate of underwriters led by Scotia Capital Inc., pursuant to which the Fund will issue on a "bought-deal" basis, subject to regulatory approval, 8.00% Convertible Unsecured Subordinated Debentures (the "Debentures") at a price of $1,000 per Debenture for total gross proceeds of $46,000,000 (the "Bought Deal Offering").

Canexus is also pleased to announce that Nexen Inc. ("Nexen") has agreed to purchase $40,000,000 aggregate principal amount of 8.00% Convertible Unsecured Subordinated Debentures (the "Nexen Debentures") by way of private placement from the Fund (the "Private Placement") on the same terms as the Bought Deal Offering, with certain exceptions, including that the Nexen Debentures will be convertible into Exchangeable Limited Partnership Units ("Exchangeable LP Units") of Canexus Limited Partnership ("Canexus LP") consistent with their current ownership structure. On a pro forma, fully diluted basis, the purchase of the Nexen Debentures will result in Nexen owning approximately 62.7% of the Trust Units.

Net proceeds from the Bought Deal Offering and Private Placement (the "Financing") will be used to fund Canexus' portfolio of growth opportunities, to repay existing indebtedness and for general corporate purposes. The Financing will help fund Canexus' suite of organic growth projects at the North American Terminal Operations unit, the North Vancouver chlor-alkali facility and at the Brazil sodium chlorate and chlor-alkali facility. At the North American Terminal unit, the Board of Directors of Canexus Limited approved the construction of rail infrastructure to allow access by a second major rail line, the purchase of an adjacent parcel of land and the front-end engineering design for Phase 3 to capitalize on existing cavern storage. In Brazil, two expansions are underway which will increase overall sodium chlorate capacity and expand the ability to produce hydrochloric acid. At the North Vancouver chlor-alkali facility, Canexus has spent $135 million of the projected $235 million cost of the technology conversion project, with start-up expected at the end of Q1 2010. Additionally, Canexus has commenced work on a project to expand hydrochloric acid production at North Vancouver. These projects are expected to start to contribute approximately $40 million to $50 million of incremental operating cash flow per annum commencing in 2010.

Given the total proceeds of the Financing and Nexen's participation in the Private Placement, Nexen has informed Canexus that it will no longer participate in the Distribution Reinvestment Plan ("DRIP") commencing with the distribution payable on or about October 15, 2009. Other investors will continue to have the opportunity to participate in the DRIP.

The Debentures and the Nexen Debentures will each bear interest from the date of issue at 8.00% per annum, payable semi-annually in arrears on December 31 and June 30 each year commencing December 31, 2009. The Debentures and the Nexen Debentures will each have a maturity date of December 31, 2014 (the "Maturity Date").

The Debentures will be convertible at the holder's option at any time prior to the close of business on the earlier of the Maturity Date and the business day immediately preceding the date specified by the Fund for redemption of the Debentures into Trust Units at a conversion price of $5.10 per Trust Unit, being a conversion rate of 196.0784 Trust Units for each $1,000 principal amount of Debentures. The Nexen Debentures purchased by Nexen in the Private Placement will be convertible into Exchangeable LP Units of Canexus LP on the same basis. Holders converting their Debentures and Nexen Debentures will receive accrued and unpaid interest thereon for the period from the date of the last interest payment to the date of conversion.

The Bought Deal Offering and Private Placement are subject to normal regulatory approvals, including approval of the Toronto Stock Exchange. Pursuant to the Bought Deal Offering, the Debentures will be offered in each of the provinces of Canada other than the province of Quebec by way of a short form prospectus, and by way of private placement in the United States to Qualified Institutional Buyers pursuant to Rule 144A.

About Canexus

Canexus produces sodium chlorate and chlor-alkali products largely for the pulp and paper and water treatment industries. Our four plants in Canada and one in South America are reliable, low-cost, strategically-located facilities that capitalize on competitive electricity costs and transportation infrastructure to minimize production and delivery costs. Canexus also provides fee-for-service hydrocarbon transloading services to the oil and gas industry from its terminal at Bruderheim, Alberta. Canexus targets opportunities to maximize unitholder returns and delivers high-quality products to its customers. Canexus is listed on the Toronto Stock Exchange under the symbol CUS.UN. More information about Canexus is available at www.canexus.ca.

Forward Looking Statements

This press release contains forwarding looking statements. More particularly, this press release contains statements concerning the closing of the Financing and the anticipated use of the net proceeds of the Financing. Although Canexus believes that the expectations reflected in these forward looking statements are reasonable, undue reliance should not be placed on them because Canexus can give no assurance that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. The closing of the Financing could be delayed if Canexus is not able to obtain the necessary regulatory and stock exchange approvals on the timelines it has planned. The Financing will not be completed at all if these approvals are not obtained or some other condition to the closing is not satisfied. Accordingly, there is a risk that the Financing will not be completed within the anticipated time or at all. The intended use of the net proceeds of the Financing might change if the Board of Directors of Canexus Limited determines that it would be in the best interests of the Fund to deploy the proceeds for some other purpose.

The forward looking statements contained in this press release are made as of the date hereof and Canexus undertakes no obligations to update publicly or revise any forward looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Contact Information

  • Canexus Limited
    Gary Kubera
    President and CEO
    (403) 571-7300
    or
    Canexus Limited
    Richard McLellan
    Senior Vice President, Finance and CFO
    (403) 571-7300