XS Cargo Income Fund TSX : XSC.UN

July 03, 2007 07:00 ET

XS Cargo Income Fund Announces Amendment to Credit Facilities and Waiver of Covenant

EDMONTON, ALBERTA--(Marketwire - July 3, 2007) - XS Cargo Income Fund (the "Fund") (TSX:XSC.UN) announced today that it has entered into an amending agreement to its credit facilities with a Canadian chartered bank. The existing credit facilities include an Operating Loan with a limit of $20 million ($6.9 million currently outstanding) and a Term Loan with a limit of $25 million ($21.25 million currently outstanding). The amendment includes a reduction in the limit on the Term Loan to $11.25 million by July 31, 2007, and includes the following changes related to the covenants:

- The maximum ratio of Senior Debt to EBITDA(1) was increased to 3.5 to 1.0 from 2.5 to 1.0 until December 31, 2007 at which time it reduces to 2.0 to 1.0.

- Until March 31, 2008 the fixed charge coverage ratio covenant has been removed and is replaced with a minimum trailing twelve month EBITDA(1) covenant of $5.5 million. At March 31, 2008 the fixed charge coverage ratio covenant will be reinstated at a maximum of 1.0 to 1.0.

- Temporary waiver until December 31, 2007 of the negative covenant restricting Distributions to Permitted Distributions, which stipulates that Distributions may not exceed Distributable Cash Flow

There are no changes to the interest rates on the Term Loan or Operating Line, provided the Fund's Ratio of Senior Debt to EBITDA(1) is below 2.5 to 1.0. If the Fund's ratio of Senior Debt to EBITDA(1) exceeds 2.5 to 1.0, interest will be charged at the lender's prime rate plus 1.0 percent on the Operating Loan and at the lender's prime rate plus 1.25 percent on the Term Loan.

The amendment to the credit facilities was the first step in the Fund's overall refinancing and management expects to complete the refinancing, as previously reported, by July 31, 2007.

Business of the Fund

The Fund commenced business operations on May 17, 2005, when it completed an initial public offering (the "IPO") of 6,106,000 trust units at a price of $10 per unit, for aggregate gross proceeds of $61,060,000. Concurrent with the closing of the IPO, the Fund acquired a 51% indirect interest in XS Cargo LP and XS Cargo LP acquired the net assets (the "Acquired Business") of Famous Brands (Edmonton) Inc. (the "Vendor"). XS Cargo LP operates 39 closeout retail stores in Alberta, British Columbia, Manitoba, Saskatchewan, Ontario, Newfoundland, Nova Scotia and New Brunswick.

(1) Non-GAAP Measure

References to "EBITDA" are to earnings before interest, income taxes, depreciation and amortization. EBITDA is not an earnings measure recognized by GAAP and it does not have a standardized meaning prescribed by GAAP. Investors are cautioned that EBITDA should not replace net income or loss (as determined in accordance with GAAP) as an indicator of the Fund's performance, of its cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows. The Fund's methods of calculating EBITDA may differ from the methods used by other issuers and may not be comparable to similar measures presented by other issuers.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. All statements other than statements of historical fact contained in this press release are forward-looking statements. You can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof. These forward-looking statements include statements with respect to the amount and timing of the payment of distributions of the Fund. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward-looking statements are subject to risks, uncertainties and assumptions, including, but not limited to, those discussed elsewhere in the press release. There can be no assurance that such expectations will prove to be correct.

Some of the factors that could affect future results and could cause results to differ materially from those expressed in the forward-looking statements contained herein include, but are not limited to, those discussed under "Risk Factors" in the Fund's MD&A.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and, except as required by law, the Fund assumes no obligation to update or revise them to reflect new events or circumstances.