New Flyer files to convert to common share structure and 'appropriate' dividends

WINNIPEG - Bus builder New Flyer Industries Inc. (TSX:NFI.UN) announced Monday that it has filed with securities regulators across Canada to convert from its current income deposit securities structure to a traditional common share structure.

"We believe a conversion to a traditional common share structure, along with an appropriate dividend policy is in the best interest of New Flyer, its investors and other stakeholders," president and CEO Paul Soubry said in a news release.

"Management believes a non-cash rights offering is the best alternative to facilitate our conversion and are pleased to bring this transaction to our shareholders."

Pursuant to the offering, NFI will issue to holders of its common shares, substantially all of which are represented by IDSs, rights to subscribe for and purchase additional shares.

Each IDS consists of one share and $5.53 principal amount of 14 per cent subordinated notes of New Flyer Industries Canada ULC. The subscription price to exercise each right may only be satisfied by delivery of subordinated notes.

New Flyer said it board intends to establish a common share dividend policy "consistent with New Flyer's long-term financial performance" and the need to retain cash flows to support the ongoing requirements of the business.

"Accordingly, New Flyer currently anticipates establishing, for dividends to be paid after August 2012, an annualized dividend equal to approximately 50 per cent of the previous annual IDS distribution level of $1.17 per IDS.

In its release, New Flyer said its board had identified a number of problems with the existing trust structure, including a high cash payout that is not supportive of its shift to a growth and diversification strategy.

It also cited capital market constraints since New Flyer was the only remaining Canadian IDS issuer.

Meanwhile, a switch to a common share structure would enhance financial flexibility to pursue strategic growth, materially reduce total third party indebtedness, reduce risks associated with Canadian dollar appreciation against it U.S. counterpart, enhance access to capital and facilitate comparison of New Flyer with other publicly traded companies, the company said.

New Flyer is a leading manufacturer of heavy duty transit buses in Canada and the United States with manufacturing facilities in Winnipeg and St. Cloud and Crookston, Min., along with a parts fabrication facility in Elkhart, Ind., and parts distribution centres in Winnipeg, Erlanger, Ken., and Fresno, Calif.

Units of New Flyer, which made its announced after markets closed, were down 11 cents at $7.35 Monday on the Toronto Stock Exchange.