Newport Partners Income Fund

December 07, 2006 08:09 ET

Newport Diversifies Capital Structure With New Senior Credit Agreement

Five-year C$320 million funding agreement from Fortress Credit Corp. adds diversification and supports growth plan

TORONTO, ONTARIO--(CCNMatthews - Dec. 7, 2006) -


Newport Partners Income Fund (TSX:NPF.UN) ("Newport" or "the Fund"), through certain of its affiliates including Newport Partners Holdings LP, ("Newport Holdings") announced today that it has closed a senior credit agreement ("the Agreement") with Fortress Credit Corp. to provide up to C$320 million in funding. Fortress Credit Corp. is an affiliate of US-based Fortress Investment Group LLC, a leading global asset management firm.

The Agreement consists of three components: a C$75 million revolving credit facility; a C$170 million term loan; and a C$75 million delayed-draw term loan ("DDTL"). Newport will use the proceeds from the C$170 million term loan to fully repay and discharge the $132 million drawn on Newport's current credit facility underwritten by a syndicate of Canadian banks and to make additional investments for Newport's portfolio of private businesses. The C$75 million revolving credit facility and the C$75 million DDTL will be accessed by Newport as needed to fund additional investments, working capital requirements, and general business purposes.

"Our practice has always been to use our credit facility to fund investments in the short term and to recapitalize these long-term assets with longer term financing when appropriate," explained Kelly Baird, Newport's Chief Financial Officer. "This Agreement gives us a more flexible and mature capital structure, including a longer term debt component that reflects the diversified earnings base of our portfolio of 17 companies and offers cost advantages over equity alternatives. At the same time, upon closing, our net debt to Last Twelve Months pro-forma EBITDA remains a conservative 1.8 times."

The following table highlights the key terms of the Agreement which will be available on SEDAR:

Structure Term Cost
$75 million first-out Five years and one day Banker's Acceptance
revolving credit facility (BA) rate plus 2.50%
$170 million term loan Five years and one day LIBOR rate plus 3.50%
to 4.95% depending on
total senior leverage
$75 million Delayed Draw Draws will be permitted LIBOR rate plus 3.50%
Term Loan up to two years to 4.95% depending on
following closing of total senior leverage
the Agreement. Maturity ratio
date is five years and
one day after the last
draw and no later than
seven years and one day
after closing

The Funding Agreement includes standard covenants customary to similar
financings including the following:

Leverage Ratio: Total Senior Debt is less than or equal to 2.75x Last
Twelve Months pro-forma EBITDA

Coverage Ratio: Total Fixed ratio is less than or equal to a
minimum of 2x Last Twelve Months pro-forma EBITDA

Payout Ratio: Distributions are less than or equal to 110% of Last
Twelve Months Distributable Cash on one year
anniversary of closing date

Maximum CAPEX: $10 million per fiscal year (to be reset from time to
time to take into account additional investments)

"We are obviously very pleased with this Agreement as it provides cost effective funding from a premier global asset management firm with a long-term vision under a flexible structure that complements our growth strategy for our investment program," said Peter Wallace, President & CEO of Newport. "Our access to qualified private business investment opportunities remains strong and we expect to make additional investments in the near term."


Fortress Credit Corp. is an affiliate of Fortress Investment Group LLC. Fortress Credit Corp. specializes in originating, structuring and providing customized financing solutions to corporate, real estate and asset-based borrowers.

Founded in 1998, Fortress Investment Group LLC is a global alternative investment and asset management firm with approximately $26 billion in assets under management as of September 30, 2006. Fortress is headquartered in New York and has affiliates with offices in Dallas, San Diego, Toronto, London, Rome, Frankfurt and Sydney.


Newport is an unincorporated, open-ended trust created to hold through the Company's investment in Newport Partners Commercial Trust, interests in Newport Private Yield LP, ("NPY") a limited partnership established under the laws of the Province of Ontario. Newport began trading on the TSX on August 8, 2005 under the symbol NPF.UN.

Newport is a leading Canadian asset manager. Newport invests in the private business asset class - a major growth engine of the Canadian economy. Our objective is to make long-term equity investments in leading private businesses that have a track record of strong earnings and potential for future growth. Newport's portfolio currently consists of 17 high-quality businesses representing a diverse cross-section of the Canadian economy. Newport unitholders participate in the cash flows, growth and diversification of the portfolio through monthly distributions. Newport's management has decades of investment experience and a significant ownership position.

The terms "EBITDA", "LTM EBITDA" and "Distributable Cash" (collectively the "Non-GAAP Measures") are financial measures used in this release that are not standard measures under Canadian GAAP. Newport's method of calculating Non-GAAP Measures may differ from the methods used by other issuers. Therefore, Newport's Non-GAAP Measures, as presented in this release may not be comparable to similar measures presented by other issuers.

EBITDA refers to net earnings of Newport and NPY determined in accordance with generally accepted accounting principles, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. LTM EBITDA refers to EBITDA for the last twelve months. Management believes that EBITDA is a useful supplemental measure of performance and is the primary basis on which management assesses financial performance and cash available for debt service, working capital, capital expenditures, income taxes and distributions.

Distributable Cash is not a standard measure under GAAP and is generally used by Canadian income funds as an indicator of financial performance. The method of calculating Newport's Distributable Cash may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to distributable cash flow as reported by such entities. Newport's method of calculating Distributable Cash is disclosed in its third quarter 2006 Management Discussion and Analysis. Management believes that Distributable Cash and Distributable Cash Per Unit are useful supplemental measures that provide investors with information on cash available for distribution.

Investors are cautioned that the Non-GAAP Measures are not alternatives to measures under GAAP and should not, on their own, be construed as an indicator of Newport's or NPY's performance or cash flows, a measure of liquidity or as a measure of actual return on the Units.

Certain statements in this news release may include "forward-looking" statements that relate to future events or future performance and reflect management's expectations and assumptions regarding the growth, results of operations, performance and business prospects and opportunities of Newport and the operating partnerships in which it holds an ownership interest (the "Operating Partnerships"). Such forward-looking statements reflect management's current beliefs and are based on information currently available to management of Newport and the Operating Partnerships. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other similar expressions concerning matters that are not historical facts. In particular, statements regarding the future operating results and economic performance of Newport and the Operating Partnerships are forward-looking statements. A number of factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking statements. In evaluating these statements, prospective purchasers should specifically consider various factors, including the risks outlined under "Risk Factors" in Management's Discussion and Analysis, which may cause actual events or results to differ materially from any forward-looking statement. Although the forward-looking statements are based on what management of Newport and the Operating Partnerships consider to be reasonable assumptions based on information currently available to it, there can be no assurance that actual events or results will be consistent with these forward-looking statements, and management's assumptions may prove to be incorrect. These forward-looking statements are made as of the date of this news release, and Newport does not assume any obligation to update or revise them to reflect new events or circumstances.

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