NORANDA INCOME FUND
TSX : NIF.UN

NORANDA INCOME FUND

October 20, 2010 08:00 ET

Noranda Income Fund Urges Unitholders to Vote Against the Resolutions of Dissident Unitholders

VALLEYFIELD, QUEBEC--(Marketwire - Oct. 20, 2010) - Noranda Income Fund (the "Fund") (TSX:NIF.UN) today announced that the notice of meeting and management information circular (the "Circular") and related materials in connection with the special meeting of unitholders ("Unitholders") of the Fund to be held on November 15, 2010 (the "Meeting") are being mailed to Unitholders and have been filed on SEDAR at www.sedar.com

The Meeting was requisitioned on behalf of certain dissident priority unitholders (the "Dissident Unitholders") for the purpose of replacing the former independent trustees of Noranda Operating Trust, who subsequently resigned from its Board of Trustees (the "Board") on September 10, 2010. On October 7, 2010, the vacancies on the Board were filled by the current Independent Trustees. Summary biographies of the Independent Trustees are set out below and more detailed information about their extensive experience and qualifications can be found in the Circular. Despite the replacement of the former independent trustees, the Dissident Unitholders have not withdrawn their requisition and now seek to replace the current Independent Trustees at the Meeting with four individuals nominated by the Dissident Unitholders (the "Dissident Nominees"). Important details of the background to this requisition are set out in the Circular. This Meeting represents a crucial point for the future of the Fund and, accordingly, Unitholders are urged to carefully review the Circular and related materials and strongly advised to cast their vote and follow the Board's recommendation.

The Board and Canadian Electrolytic Zinc Limited (the "Manager"), the manager and administrator of the Fund and its Salaberry-de-Valleyfield, Québec processing facility, unanimously recommend that Unitholders vote AGAINST the resolutions proposed by the Dissident Unitholders by voting the WHITE proxy that is being mailed with the Circular in accordance with the Fund's recommendation.

The Board believes that the Dissident Unitholders are not acting in the best interests of the Fund or its Unitholders and, if the Dissident Nominees are elected, the Board strongly believes that the sustainability of the Fund will be placed in serious jeopardy and Unitholders will be giving up their chance to enjoy improved value and returns expected from the Fund's current business plan. The Board's recommendation is made for the following reasons:

  • Each of the Board's Independent Trustees is completely independent. None of the Independent Trustees have any current or prior material relationship with the Fund, Xstrata Canada Corporation or their affiliates that would interfere with their ability to vigorously advance the interests of all priority unitholders and the Fund's other stakeholders. The unequivocal independence of the Independent Trustees was a principal criteria in the thorough search process conducted by the Board following the resignation of the former independent trustees. The Board was assisted in its search by Egon Zehnder International, a leading independent executive search firm, who provided numerous highly qualified and independent candidates from which the current Independent Trustees were ultimately selected. The Dissident Unitholders were invited but declined to permit the Dissident Nominees to meet with the Board.

  • In addition to their independence, the current Independent Trustees are highly qualified and collectively have the necessary experience to serve the best interests of the Fund and all Unitholders and to shepherd the Fund through the unique short-term and long-term challenges and opportunities it faces. 

  • The Board's plan for the Fund is to maximize value for Unitholders by reinstating distributions to priority unitholders at sustainable levels while also focusing on the long-term viability of the Fund's business. Consistent with this balanced approach, under the direction of the Board and Independent Trustees, the Manager is pursuing a business plan that includes an optimal refinancing of the Fund's debt and takes into consideration the challenges in the global zinc processing market that will impact the Fund in the near- to mid-term. The Board believes that its approach contrasts with the short-term focus proposed by the Dissident Unitholders and thereby captures more value while promoting the long-term viability of the Fund's business.

  • The immediate focus of the Board's Independent Committee is to implement a refinancing plan to address the pending maturity of the $153.5 million in senior secured notes and existing revolving credit facility (which, as of September 30, 2010, had an outstanding balance of $31.5 million). The Independent Committee has available to it all financing alternatives that the Dissident Unitholders' nominees might propose and has the necessary experience and qualifications to implement an optimal long-term refinancing of the Fund's debt that maximizes value for priority unitholders. Replacing the current Independent Trustees with the Dissident Nominees would not expand the financing alternatives available to the Fund and would be detrimental to the Board's efforts to refinance the $153.5 million in senior secured notes maturing December 20, 2010, putting the solvency of the Fund at risk.

  • The Dissident Unitholders are focused only on short-term outcomes that are not in Unitholders' best interests. The business plan proposed by the Dissident Unitholders and made available to the Board to date indicates that they wish to opportunistically increase distributions in the short-term, while at the same time putting in place a capital structure that risks the future viability of the Fund and jeopardizes the equity investment of all Unitholders. It is clear that the Dissident Unitholders' refinancing plan seeks to maximize distributions to the detriment of the Fund's long-term sustainability.

  • The outcome and viability of the Dissident Unitholders' plan is highly uncertain. The refinancing proposed by the Dissident Unitholders is aggressive and would be difficult to implement and may well be unobtainable due to the solvency risks that it would create and the risk that it may not receive the support of Xstrata Canada which currently provides credit support for the Fund's debt. The Dissident Unitholders' proposed plans also risk the Fund not having a refinancing in place and therefore defaulting under its $153.5 million senior secured notes due December 20, 2010.

  • The Dissident Unitholders' actions have disrupted and adversely impacted the activities of the Board at a critical juncture in the Fund's development. The Board's refinancing efforts have already been delayed by the requisition of the Meeting and the resignation of the former Independent Trustees. 

  • The Dissident Unitholders seek to obtain a level of control over the Fund that is out of proportion to their ownership of priority units. The election of the Dissident Nominees will effectively allow the Dissident Unitholders to obtain control of the Fund for no consideration or premium paid to Unitholders that is typically associated with a change of control.

A further discussion of each of these and the other reasons the Board is asking for Unitholders to support the current Board are contained in Circular and other meeting materials, which are being mailed to Unitholders and are available on SEDAR at www.sedar.com. Unitholders are urged to carefully review the Circular and related meeting materials.

The Board has acted and will continue to act in the best interests of the Fund and all priority unitholders, and the continued support of Unitholders (regardless of the number of units held) is very important to the Board and to protecting the value of Unitholders' investments. It is requested that Unitholders complete the WHITE proxy and vote AGAINST the Dissident Unitholders' resolutions and discard any materials received from the Dissident Unitholders

If Unitholders have any questions or need assistance in casting their vote or voting their WHITE proxy, they are encouraged to contact the Fund's proxy solicitation and information agent, Mackenzie Partners, Inc., toll-free at 1-800-322-2885 or call collect at 212-929-5500.

MACKENZIE PARTNERS, INC.
 
105 Madison Avenue
New York, New York 10016
proxy@mackenziepartners.com
(212) 929-5500 (call collect)
or
Toll-Free (800) 322-2885

Summary Biographies of the Current Independent Trustees

John J. Swidler, Chair of the Board and Chair of the Independent Committee of Noranda Operating Trust, is a Senior Advisor specializing in corporate finance at RSM Richter LLP where he previously served in the positions of Managing Partner and Chairman of the firm's executive committee. Mr. Swidler has been a director of Reitmans (Canada) Limited since April 2, 2008, where he is also a member of the Audit Committee. Mr. Swidler also serves on the board of directors of Dollarama Inc., where he is Chair of the Audit Committee. Mr. Swidler holds a Chartered Accountant (CA) designation and in 1992 received his Fellow Chartered Accountant (FCA) designation from the Ordre des comptables agrées du Québec. 

Jean Pierre (J.P.) Ouellet has been an advisor to St-Lawrence Capital since 2008. Formerly, he has held such positions as senior partner of the law firm Stikeman Elliott LLP, where he specialized in capital markets transactions as well as mergers and acquisitions, and Senior Vice-President, Chief Legal Officer and Corporate Secretary of Canadian National Railways Inc. More recently he served as a senior executive with RBC Capital Markets, where he had overall responsibility for its activities in Québec and was involved in several major capital markets transactions, in both equity and debt financings, as well as many mergers and acquisitions. Mr. Ouellet currently serves on numerous corporate and non-profit boards of directors, including the Caisse de dépôt et placement du Québec, where he chairs the board's Ethics and Governance Committee and sits on the Human Resources Committee; Richmont Mines Inc., where he chairs the board's Governance Committee; GBO Inc.; and the MacDonald Steward Foundation.

Barry Tissenbaum is an independent consultant of B.A.T. Consulting which provides advisory services to numerous companies. Mr. Tissenbaum is a former senior partner with Ernst & Young LLP in Toronto where he headed their Retail & Consumer Products division and worked for many years in the Entrepreneurial Services Group and served as the Toronto Mid-Town Managing Partner. Mr. Tissenbaum received his Chartered Accountant (CA) designation from Québec in 1968 and from Ontario in 1974. Mr. Tissenbaum currently serves on numerous corporate boards of directors, including Corel Corporation and Medworxx Solutions Inc., where he is Chair of the Audit Committee. He is on the Independent Review Committee of Faircourt Asset Management, and on advisory boards of numerous private companies. Mr. Tissenbaum also served on the board of Universal Energy Group Ltd., where he was a director and Chair of the Audit Committee, and Northstar Healthcare Inc., where he was a member of the Audit Committee.

François R. Roy is a corporate director with extensive past executive experience including as the Chief Financial Officer at Télémédia Corporation, a Canadian media company, and also at Avenor Inc., an international forest products company, and Quebecor Inc. Mr. Roy began his career at The Bank of Nova Scotia, where he held several positions in Canada and the United States. He subsequently worked for Société générale de financement du Québec. He was also Vice Principal (Administration and Finance) at McGill University from 2007 to 2010 and, in that capacity, was McGill's Chief Financial Officer and Chief Administration Officer. He has been a corporate director since 1998 and sits on the boards of Transcontinental Inc., Fibrek Inc., Macquarie Power & Infrastructure Income Fund and Caisse de dépôt et placement du Québec.

Noranda Income Fund is 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.

Forward-Looking Information

This release may contain certain forward-looking information, including in respect of the Fund and Noranda Operating Trust's future financing plans and business plans and operation of the CEZ processing facility and the anticipated financial and operating results of the Fund and distributions to Unitholders. Forward-looking information can be identified by the use of words such as "believes", "plans", "expected", or variations of such words and phrases, or statements that certain actions, events or results "may", "could", "might" or "will" be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors, which may cause the actual events, results or performance to be materially different from any future events, results or performance expressed or implied by the forward-looking information. Examples of such risks, uncertainties and other factors include, but are not limited to: (a) loan default and refinancing risk associated with the existing credit facility and senior notes; (b) potential negative financial impact from regulatory investigations, claims, lawsuits and other proceedings; (c) general business, market and economic conditions; (d) the demand for zinc metal, sulphuric acid and copper in cake and available supply of zinc concentrate; (e) changes in capital expenditure requirements and future obligations and liabilities; (f) changes in legislative and regulatory requirements governing the operation of the Fund and its business; (g) reliance on Xstrata Canada and the Manager for the operation and maintenance of the CEZ processing facility and credit support; (h) general economic conditions and the condition of financial and credit markets; and (i) the other general risks and uncertainties set out in the Fund's continuous disclosure documents on file with the Canadian Securities Regulatory Authorities, including its annual information form dated March 15, 2010 and management's discussion and analysis related to its fiscal 2009 annual consolidated financial statements. Reference should also be made to the Fund's notice of meeting and management information circular dated November 15, 2010 in respect of the Meeting on www.sedar.com. Any forward-looking information is given as of the date of this release and, except as required by applicable law, the Fund undertakes no responsibility to update such forward-looking information in the future.

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

Contact Information

  • Noranda Income Fund's Manager
    Michael Boone
    Vice President and Chief Financial Officer
    416-775-1561
    www.norandaincomefund.com