TSX-BAD.UN
CALGARY, Oct. 26 /CNW/ - Badger Income Fund (the "Fund") is pleased to
announce that it intends to hold a special meeting of its unitholders to seek
their approval to a proposal for an internal reorganization to convert the
organizational structure of the Fund to the more modern trust-on-partnership
structure. This structure has been adopted by a number of other income trusts
and will achieve greater efficiencies.
Completion of the internal reorganization is subject to the receipt of
the approval of at least 66 2/3% of the votes cast by the unitholders of the
Fund at a special meeting of unitholders currently anticipated to be held on
or about December 20, 2006. It is intended that the reorganization will be
accomplished by way of a "Plan of Arrangement" under the Business Corporations
Act (Alberta) and therefore is also subject to the approval of the Court of
Queen's Bench of Alberta. The reorganization will also be conditional upon
receipt of a satisfactory advance tax ruling (the "Advance Tax Ruling") from
the Canada Revenue Agency, which Advance Tax Ruling has been applied for by
the Fund, as well as consents from third parties and other regulatory
approvals, which the Fund expects to receive in due course.
As stated earlier, the purpose of the proposed internal reorganization is
to convert the organizational structure of the Fund to the more modern
trust-on-partnership structure. Badger Daylighting Limited Partnership
("Badger LP"), an indirect subsidiary of the Fund, is expected to generate
significant operating profits and the current organizational structure, in
which Badger Daylighting Inc. ("BDI") owns approximately 71% of the
outstanding limited partnership units of Badger LP, creates the potential for
taxation in BDI which would result in reduced cash flow for distribution to
holders of units of the Fund. Management of the Fund believes that the more
modern trust-on-partnership structure, whereby the Fund would own 100% of the
outstanding limited partnership units of Badger LP (i.e. a 99.9% limited
partnership interest in Badger LP), resulting in increased cash flow to
holders of units of the Fund, would be better received by the capital markets
and would therefore be in the best interests of the Fund and its Unitholders.
Management of the Fund believes that a modern trust-on-partnership structure
will maximize Unitholder value and better accommodate future expansion
opportunities, which the Fund anticipates would not be made through BDI but
would be made through an alternative, more flexible vehicle such as Badger LP.
Further, the arrangement will provide for a more streamlined structure to fund
any future expansion opportunities and will provide a more flexible legal and
operating structure in the form of a more modern income trust model. As such,
upon completion of the proposed arrangement, Badger LP will substantively
become a wholly-owned subsidiary of the Fund.
The arrangement does not contemplate the acquisition of any additional
interest in any operating assets or the disposition of any of the Fund's
existing interests in operating assets. Following completion of the
arrangement, Unitholders will continue to hold the same number of units of the
Fund and the Fund will continue to own, directly and indirectly, the same
proportionate interest in the operating assets that it held immediately prior
to the effective time of the arrangement. Unitholders will not be required to
tender or exchange their units of the Fund to complete the arrangement.
Subject to obtaining the Advance Tax Ruling, and any regulatory approvals
determined to be necessary or advisable in connection with the arrangement,
and upon obtaining the requisite approval of Unitholders at the abovementioned
meeting to be held on or about on December 20, 2006, it is intended that the
arrangement will be effected on or about January 1, 2007.
Badger Income Fund is an open-ended trust that is North America's largest
provider of non-destructive excavating services. Badger traditionally works
for contractors and facility owners in the utility and petroleum industries.
Our key technology is the Badger Hydrovac, which is used primarily for safe
digging in congested grounds and challenging conditions. The Badger Hydrovac
uses a pressurized water stream to liquefy the soil cover, which is then
removed with a powerful vacuum system and deposited into a storage tank.
Badger manufactures its truck-mounted hydrovac units.
Badger Income Fund's business model involves the provision of excavating
services through two distinct entities: the Operating Partners (franchisees in
the United States and agents in Canada), and Badger Corporate. Badger
Corporate works with its Operating Partners to provide Hydrovac service to the
end user. In this partnership, Badger provides the expertise, the trucks, and
North American marketing and administration support. The Operating Partners
deliver the service by operating the equipment and developing their local
markets. All work is invoiced by Badger and then shared with the Operating
Partner based upon a revenue sharing formula. In limited locations Badger has
established corporate run operations to market and deliver the service in the
local area.
The Toronto Stock Exchange neither approves nor disapproves of the
contents of this Press Release.
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