EDMONTON – Carfinco Income Trust (TSX:CFN.UN) says it plans to convert to a corporate structure, making the announcement Thursday shortly after saying it was boosting cash distributions to unitholders by 20 per cent.
The Edmonton-based provider of car loans to high-risk borrowers said the conversion, subject to unitholder and regulatory approval, would mean no change in the company’s payout.
“Post conversion, the board intends to continue with a monthly dividend of three cents per share, which is equivalent to the fund’s current monthly distribution, Carfinco said in a news release.
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Earlier Thursday, the company said it would raise monthly distributions to three cents a month from 2.5 cents, starting in September.
“The increase is a reflection of the strong financial performance the fund has achieved so far in 2011,” CEO Tracy Graf said in a statement. “Loan originations continue to be strong and delinquent accounts remain at acceptable levels.”
In June, Carfinco reported a 20 per cent increase in first-quarter profits and revenues on the strength of new risk-based pricing measures in Alberta and expansion into the province of Quebec.
The move to convert to a corporate structure, under which unitholders will receive, on a tax deferred basis, one common share for each unit held, was prompted by changes in Canadian tax law, Carfinco said.
“As a result of these changes, as well as the opportunities to advance its long-term strategic plan, the fund believes that it is in its best interests to convert to a corporation.”
Carfinco, through a network of independent and franchise dealerships, provides consumer vehicle loans to borrowers unable to obtain financing through traditional lending sources.
On the Toronto Stock Exchange, the company’s units were up 15 cents at $6.30 Thursday afternoon.
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