Lakeview REIT 6.5% convertibles holders approve maturity extension

New York, Feb. 22 - Lakeview Hotel Real Estate Investment Trust holders approved an amendment to the terms of its C$18 million of outstanding 6.5% series C convertible redeemable subordinated debentures at a meeting on Wednesday.

The maturity extension permitted by the holders will allow the trust "to focus on its current business strategy and to maintain an adequate working capital position," Lakeview said in a news release.

"We believe that these amendments are in the best interests of debentureholders by providing them with an increasing coupon over time along with the issuance of warrants providing debentureholders with the potential to participate in the growth in the value of the REIT," commented Keith Levit, Lakeview president, in the release

Announcing the proposal on Jan. 17, Lakeview said it did not have the cash needed to repay the debentures when they mature on June 30. The amendment extends the maturity by five years to June 30, 2017.

In exchange for passing the amendments, holders of record as of 5 p.m. ET on March 1 will receive 384 trust unit purchase warrants for each note on March 2. Each warrant is exercisable at C$0.65 until March 2, 2017.

Lakeview REIT will be required to enter into a supplemental trust indenture with CIBC Mellon Trust Co., the trustee, in order for the amendments to take effect. The amendments will be effective on March 2.

The trust said its operations have seen recent improvement, but its cash resources have been used to service current debt.

The company said in January that its only alternative to the proposed amendments would be to issue trust units as payment at maturity as permitted under the trust indenture, but it does not believe that this option "would be of benefit to the debentureholders or the unitholders of Lakeview REIT."

Changes to convertibles

The amendment also changes the interest payment from being calculated and payable semiannually at 6.5% per year to being calculated and payable semiannually at the rate of

• 6.5% per year, payable semiannually in arrears on June 30, Dec. 31, 2012, June 30, 2013 and Dec. 31, 2013;

• 7.5% per year, payable semiannually in arrears on June 30, 2014, Dec. 31, 2014, June 30, 2015 and Dec. 31, 2015; and

• 8.0% per year, payable semiannually in arrears on June 30, 2016, Dec. 31, 2016 and June 30, 2017.

Lakeview is also making the following changes:

• Eliminating the ability of holders to convert the debentures into trust units;

• Eliminating the ability of the trust to repay the principal amount or any interest through the issuance of units on redemption or maturity;

• Eliminating the change-of-control put option providing that upon the occurrence of a change of control involving the acquisition of voting control or direction over 66 2/3% or more of the units by any person or group of persons, holders may put their notes at 101 plus accrued interest;

• Amending the call option so that beginning March 2, the notes will be callable at a price equal to par plus accrued interest from time to time on not more than 60 days' and not less than 30 days' written notice;

• Improving the security granted by the trust for the repayment by providing that the notes will rank senior to all future series of debentures issued by the trust and are subordinate only to senior security and are pari passu with the five-year 8.5% series D convertible redeemable subordinated debentures; and

• Increasing the total principal amount of notes authorized to be issued under the trust indenture by $326,000 to $18,326,000.

Burgeonvest Bick Securities Ltd. is the soliciting dealer.

Lakeview is a hotel-focused real estate investment trust based in Winnipeg, Manitoba.

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