May 30, 2011 13:58 ET

TerraVest Income Fund Announces Completion of New Credit Facility, A Special Distribution of $1.15 Per Unit and Sale of Don Park USA

VEGREVILLE, ALBERTA--(Marketwire - May 30, 2011) - TerraVest Income Fund (TSX:TI.UN) announced today that it has completed a new credit facility with HSBC Bank Canada, declared a special cash distribution of $1.15 per unit of the Fund and entered into an agreement for the sale of Don Park USA.

Credit Facility

The Fund and certain of its subsidiaries, including but not limited to TerraVest Master Commercial Trust, TerraVest Industries Limited Partnership and Beco Industries Limited Partnership, entered into a facility letter dated effective April 28, 2011 to establish a credit facility with the HSBC Bank Canada. The credit facility was funded on May 30, 2011. Under the new credit facility, HSBC Bank Canada has agreed to provide up to $15 million in operating loans, letters of guarantee, banker's acceptances and documentary credits subject to certain covenants and margin requirements for receivables and inventory. Security for the credit facility includes a general security agreement constituting a first ranking security interest over all present and after-acquired personal property of the Fund's subsidiaries other than Diamond Energy Services Limited Partnership, assignment of insurance policies, guarantees of each of the Fund's subsidiaries other than Diamond Energy Services Limited Partnership, a share pledge agreement by TerraVest Master Commercial Trust, and a subordination agreement in which the Fund subordinates all present and future indebtedness, liabilities and obligations owed to the Fund by its subsidiaries.

Special Distribution

The special cash distribution of $1.15 per unit will be paid on June 15, 2011 to unitholders of record on June 8, 2011. The ex-distribution date is June 6, 2011.

The Trustees have determined that it is in the best interest of the unitholders of the Fund to make this distribution from the proceeds realized from the Fund's recent divestiture of certain operating businesses. With the proceeds of the sale of Don Park US, the Fund will have cash or equivalents on deposit of $22.8 million, of which $22.6 million will be used to pay the special distribution of $1.15 per unit.

As a result of the taxable losses realized on such divestitures and assuming no material acquisitions, dispositions or investments during such period and financial performance in line with management's expectation, the tax horizon of the Fund is such that the Fund will not have to pay income tax in fiscal 2011 and fiscal 2012 and, accordingly, the Fund expects that the special distribution announced today will be characterized as a return of capital. The tax horizon of the Fund depends on a number of factors, including the Fund's transactions, investments and performance.

Immediately after payment of this Special Distribution, the Fund will meet all covenant tests under the new credit facility and have sufficient margined assets to make available the full $15 million credit facility.

Sale of Don Park USA

The Fund has entered into a definitive agreement to sell to the minority interest holder in Don Park USA all of the Fund's 80% interest in Don Park USA for $750,000. The transaction is expected to close on May 31, 2011.

The Fund's consolidated financial statements and MD&A are available on SEDAR at www.sedar.com and on the Fund's website at www.terravestincomefund.com.

About TerraVest Income Fund

The Fund has investments in three portfolio businesses:

  • RJV Gas Field Services ("RJV"), one of Canada's largest providers of wellhead processing equipment for the natural gas industry in western Canada;
  • Diamond Energy Services ("Diamond"), a market leader in providing well servicing to the oil and natural gas sector in south-western Saskatchewan, with a growing presence in Alberta; and
  • Beco Industries ("Beco"), one of Canada's largest designers and importers of home textile products;

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 the credit facility and compliance with the terms thereof, the declared special distribution, the tax horizon and the sale of Don Park USA.

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 and prospects of the portfolio businesses and the markets in which they compete are considered in evaluating the Fund's ability to comply with the terms of the credit facility and pay distributions and the Fund's tax horizon. The assumption that the sale of Don Park USA will close depends on the Fund and the purchaser meeting the conditions to close. Should any of these 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 1, 2011 and under "Financial Instruments" in the Fund's MD&A for the three months ended March 31, 2011 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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