Noranda Income Fund
TSX : NIF.UN

Noranda Income Fund

April 15, 2011 09:41 ET

Noranda Income Fund Provides Update on Long-Term Refinancing

SALABERRY-DE-VALLEYFIELD, QUEBEC--(Marketwire - April 15, 2011) - Noranda Income Fund (the "Fund") (TSX:NIF.UN) today announced that its wholly-owned subsidiary, Noranda Operating Trust (the "Operating Trust"), intends to exercise, on or before May 2, 2011, its option to extend the $250 million bridge credit facility (subsequently reduced in accordance with its terms to $245 million) obtained from a syndicate of lenders on December 2, 2010 for an additional six months. Upon extension, the bridge facility will be available to the Operating Trust until December 1, 2011. The covenants that restrict the Fund and its subsidiaries in several respects, including their ability to make distributions or redeem or repurchase units, will remain in effect for the extension period. Also, in accordance with the terms of the bridge facility, upon extension, a payment of approximately $1.84 million will be made by the Operating Trust to the syndicate of lenders, subject to any voluntary reduction in the size of the facility prior to extension.

Since securing the bridge facility in December 2010, management of Canadian Electrolytic Zinc Limited (the Operating Trust's manager) and the Independent Committee of the Operating Trust, with the assistance of their financial advisor, TD Securities Inc. ("TD Securities"), have worked diligently to pursue a long-term refinancing solution for the Operating Trust. The Operating Trust has received proposals for an asset-based revolving credit facility from several potential lenders and is also in discussions to secure long-term debt financing with a number of other parties.

In connection with securing the bridge facility in December 2010, Xstrata Canada Corporation ("Xstrata Canada") agreed to continue to provide its credit support for the period of the bridge in exchange for a credit support fee. However, Xstrata Canada advised the Operating Trust that its provision of credit support for the bridge facility did not imply that its support would be provided for long-term refinancing. To date, all of the long-term refinancing alternatives presented to the Operating Trust require that Xstrata Canada continue to provide credit support.

On March 10, 2011, the Independent Committee advised Xstrata Canada of the status of refinancing efforts and advised Xstrata Canada of the potential lenders' requirements with respect to Xstrata Canada's credit support. On April 6, 2011, Xstrata Canada confirmed in writing that it was prepared in principle to provide such support in exchange for the elimination of the subordination of distributions on the Ordinary Units held by Xstrata Canada in Noranda Income Limited Partnership. Xstrata Canada's position was reiterated to the Independent Committee in a letter dated April 11, 2011. The Independent Committee has since retained the services of Canaccord Genuity to act as its financial advisor in connection with this matter.

The Independent Committee has been advised by TD Securities, the Operating Trust's financial advisor in connection with the long-term refinancing, that it would be very difficult to complete any of the long-term refinancing proposals being considered prior to expiration of the initial term of the bridge facility on June 2, 2011. Given the potential lenders' requirements with respect to Xstrata Canada's credit support, and in the absence of an agreement with Xstrata Canada with respect to its credit support as of the date hereof, the Independent Committee recommended to the Operating Trust's Board of Trustees that it resolve to exercise, on or before May 2, 2011, the Operating Trust's extension right under the bridge facility. Acting on the Independent Committee's recommendation, the Board of Trustees resolved to exercise, on or before May 2, 2011, the Operating Trust's extension right under the bridge facility.

There is no assurance that the negotiations between the Independent Committee and Xstrata Canada will be successful and that Xstrata Canada will agree to provide its credit support in connection with the Operating Trust's long-term refinancing, or that other alternatives not requiring such credit support will be available to the Operating Trust. Even if negotiations with Xstrata Canada are successful or other alternatives not requiring its support are available, there is no assurance that the Operating Trust will enter into definitive agreements with lenders with respect to its long-term refinancing prior to the expiration of the bridge facility, as extended. In addition, any arrangement negotiated with Xstrata Canada or lenders might be subject to Fund unitholder or Toronto Stock Exchange or other regulatory approval, and there is no assurance that any such approval will be obtained.

Noranda Income Fundis an income trust whose units trade on the Toronto Stock Exchange under the symbol "NIF.UN". Noranda Income Fund was created to acquire Noranda Inc.'s CEZ processing facility and ancillary assets (the "CEZ processing facility") located in Salaberry-de-Valleyfield, Québec. The CEZ processing facility is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America, where the majority of its customers are located. It produces refined zinc metal and various by-products from zinc concentrates purchased from mining operations. The CEZ processing facility is operated and managed by Canadian Electrolytic Zinc Limited.

Further information about Noranda Income Fund can be found at www.norandaincomefund.com.

Contact Information

  • Michael Boone
    Vice President and Chief Financial Officer,
    Canadian Electrolytic Zinc Limited
    Noranda Income Fund's Manager
    416-775-1561