08.19
True announced that it plans to convert back to a corporate structure,
repositioning itself as a growth oriented E&P. The reorganization has been
structured as a tax deferred roll over for Canadian taxation purposes with
the special meeting and conversion expected to take place in late October.
Existing unitholders will receive common shares in the new company on a
one-for-one basis. In addition, the newco will inherit True’s $86MM of
convertible debentures which will move over with the same conversion
terms (due to mature in June 2011).
Following the suspension of its distributions in Q1/09, True became less
comparable to other trusts. With the corporate conversion True will now
move into a more relevant junior peer group. Given the company’s $495MM
of tax pools, we do not see taxation as an issue in the foreseeable future.
As part of its restructuring efforts, True has reduced debt by ~$109MM YTD,
while optimization work has largely mitigated declines. Trading at a 3.9x
2010 EV/DACF multiple, vs. the trust group at 6.9x & its junior peers at
4.1x
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