The "New Class" in an old, popular investment vehicle
Part 1: A Comeback in the Making?
The income trust game is back - just in a different form.
Canadian Finance Minister Jim Flaherty killed these high-yield, tax sheltered public companies on October 31, 2006 - not so affectionately called the "Hallowe'en Massacre" by the millions of investors who were enjoying 10%+ payouts annually.
Canadian companies had until January 1 2011 to convert back to a regular corporation or face new taxation that essentially reverted them back anyway.
But the market has found a loophole that may allow for many new trusts - especially in the energy sector:
Don't use Canadian assets.
Two new income trusts have listed on the Toronto Stock Exchange (TSX) recently. Last year, Eagle Energy Trust (EGL.UN) went public on the TSX, which was the first Canadian-listed oil and gas trust to launch since Flaherty's Halloween surprise in 2006.
The company holds only foreign oil-producing assets - 1269 bopd of light oil production in Texas - a loophole that excludes it from the new Canadian tax regime. The founders of Eagle Energy believe this new structure will serve as a template for other oil and gas companies.
They raised $150 million in their initial public offering at $10/share last November with an additional $20 million as well via a concurrent sale of securities to their vendor.
The company quickly followed up with…