December 20, 2010 09:20 ET

TerraVest Announces Closing of Sale of Don Park and Provides Update on Strategic Direction

VEGREVILLE, ALBERTA--(Marketwire - Dec. 20, 2010) - TerraVest Income Fund ("TerraVest" or the "Fund") (TSX:TI.UN) announced today that its portfolio business, Don Park Limited Partnership ("Don Park"), closed the sale to RONA Inc. of the assets and operations of its Canadian business that manufactures and distributes HVAC and fire products for the residential, commercial, industrial and institutional markets ("Don Park Canada"). The Fund received proceeds of $22 million at close. The Fund expects to receive approximately $3.9 million in the first quarter of 2011 on confirmation of the audited closing balance sheet of Don Park.

The board of trustees and management are currently assessing the optimal use of the proceeds received at closing. It is anticipated that all or a portion of the proceeds will be used to reduce the approximately $24 million owing under the Fund's credit facility.

In accordance with the terms of the Fund's credit facility, the credit limit is reduced by 80% of the proceeds from the sale of Don Park Canada. Accordingly, the effective borrowing limit is reduced to approximately $16 million.

As previously announced, the Fund's management continues to evaluate each of the portfolio businesses in order to determine fair value. The board of trustees and management have also reviewed the future strategic direction of the Fund, and, as a result of this review, the board of trustees has determined that it is appropriate that management continue the on-going process of testing the value of each portfolio business. This process may result in the future sale of one or more portfolio businesses or the assets thereof. Subject to the Fund's cash requirements at the relevant times, the Fund plans to use proceeds received from the sale of portfolio businesses to pay one or more special distributions to unitholders.

After giving effect to the sale of Don Park Canada and assuming no material acquisitions, dispositions or capital investment during such period and financial performance in line with management's expectations, it is expected that the Fund's tax horizon is such that the Fund will not have to pay income tax in fiscal 2011 and fiscal 2012. The Fund's tax horizon depends on a number of factors, including the Fund's acquisitions, dispositions or capital investment and financial performance. Accordingly, there is no current plan to convert the Fund from an income fund to a corporate structure.

About TerraVest Income Fund

The Fund has investments in five portfolio businesses:

  • RJV is one of the largest providers of wellhead processing equipment for the natural gas industry in western Canada.

  • Diamond is a market leader in providing well servicing to the oil and natural gas sector in south western Saskatchewan.

  • Ezee On manufactures heavy duty equipment for large acreage grain farms and livestock operations.

  • Beco is one of the largest Canadian designers and importers of home textile products.

  • Don Park USA is a local supplier of heating, ventilation and air condition (HVAC) products in the southeastern United States (the portion of the Don Park business retained after the sale of Don Park Canada).

Caution Regarding Forward-Looking Statements

This news release includes forward-looking statements. All statements, other than statements of historical fact, contained in this news release are forward-looking statements, including, without limitation, statements regarding our strategic direction and evaluation of the portfolio businesses, potential sale of portfolio businesses or assets thereof, the credit facility, special distributions, tax horizon, capital investments, financial position and results, cash flow, operations, and other plans and objectives of or involving the Fund. Readers can identify many of these statements by looking for words such as "expects", "plans", "will", "anticipates", "continues" and similar words or the negative thereof. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements require us to make assumptions and, accordingly, forward-looking statements are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors may cause actual future circumstances, results, conditions, actions or events to differ materially from the plans, expectations or estimates expressed in the forward-looking statements and the assumptions underlying them.

Assumptions and analysis about the performance of the Fund, as a whole, and the performance, prospects and value of the portfolio businesses and the markets in which they compete are considered in evaluating the portfolio businesses, the Fund's ability to pay distributions and the Fund's tax horizon, in setting the business plan for the Fund, in forecasting the Fund's expected future financial position and results, cash flow, operations, and other plans and objectives of or involving the Fund and in making related forward-looking statements. Should any of these factors or assumptions vary, actual results may differ materially from the forward-looking statements.

The information set forth under "Risk Factors" in the Fund's annual information form dated March 23, 2010 and under "Financial Instruments" in the Fund's MD&A for the year ended December 31, 2009 identifies risk factors that could affect the operating results and performance of the Fund and its portfolio businesses. We caution that the lists of factors discussed in the Fund's annual information form and MD&A are not exhaustive and that, when relying on forward-looking statements to make decisions with respect to the Fund, investors and others should carefully consider the factors discussed, as well as other uncertainties and potential events, and the inherent risks and uncertainties of forward-looking statements. The forward-looking statements herein are made based on the assumption that the Fund will not be affected by such risks or other factors referred to above, but that, if the Fund is affected by any of such risks or factors, the forward-looking statements may become inaccurate.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release. Except as required by applicable securities laws, the Fund does not undertake to update any such forward-looking statements.

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