Newport fund enters into refinancing, exchange of 7%, 7½% debentures

By Jennifer Chiou

New York, Nov. 30 - Newport Partners Income Fund announced that it entered into support agreements for a comprehensive refinancing of its senior debt, including mandatory exchange transactions for its 7½% debentures due Dec. 31, 2010 and its 7% debentures due Dec. 31, 2012.

The fund entered into the agreements with Marret Asset Management Inc. and K2 Associates Investment Management Inc. Together, Marret, on behalf of various funds it manages, and K2 own or control roughly 55% of the 7½% debentures and 41% of the 7% debentures.

According to a news release, the fund obtained support from holders of a "substantial percentage" of debentures.

In exchange for the debentures, the fund will issue an equal amount of new 8% five-year second-lien notes and subordinated unsecured notes.

In effect, the exchange will provide for an extension on the repayment period for amounts owed under the debentures series.

Newport said that it will also exchange accrued interest of about $24 million at Dec. 31 for the three-year unsecured notes.

As reported in June, the fund said it was in default on its C$164.5 million of subordinated unsecured convertible debentures because it did not make the C$6 million interest payment due June 30 on the debentures.

The exchange is expected to close on Jan. 17.

The agreements further involve the assignment to Marret and amendment of Newport Finance Corp.'s senior secured credit facility.

In July, the fund said its Newport Finance subsidiary entered into a forbearance agreement, disclosing that it owed about C$242 million under a senior secured credit agreement, including C$210 million under a term loan and C$32 million drawn on a revolving credit facility.

At the time, the company said it was contractually prohibited from making the debenture payment while events of default existed on the credit agreement.

New notes

The new 8% notes will be guaranteed by and secured by a second lien against assets of the fund and most of its affiliates.

Newport added that the unsecured notes would be convertible on maturity at its exclusive option into a maximum of 10% of its equity.

Canaccord Genuity Corp. was the fund's financial adviser.

Newport is a Toronto-based asset management investment trust.

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