OKOTOKS, Alta. — One more trucking income trust has jumped on the corporate bandwagon. The Mullen Group Income Fund has revealed its intention to become the latest transport outfit to convert into a corporation.
"On Oct. 31, 2006 when the federal government announced its intention to effectively eliminate the income trust structure, we knew that the day would come when we would be forced to convert,” stated Murray K. Mullen, chairman and CEO of Mullen Group. “A conversion in 2009 is in the best interests of Mullen and our security holders."
Like many carriers in similar situations, Mullen said at the time that the tax change (which takes effect in 2011) would squeeze the Fund’s access to capital and result in the demise of the trust structure as a viable business model.
In the current economic climate, the Fund’s financial flexibility is now "limited due to its commitment as an income trust to distribute a large portion of its cash flow."
"We remain committed to our strategic plan of growth through acquisition in the two areas of the economy that we have developed a deep understanding and industry leadership – the oil and natural gas service industry and the trucking and logistics sector in North America,” added Mullen. “The conversion will provide our management team with the best opportunity to deliver long-term capital growth and a reliable cash yield."
Former income trusts TransForce, Canada Cartage and ATS Andlauer, have all surrendered their income fund status and turned their companies private. That basically leaves Contrans and Trimac as the last two large trucking income fund in Canada, although analysts expect the latter carrier to follow suit as well.
In past interviews, Contrans CEO has been steadfast on remaining an income trust, saying it still suits his company’s business model.
The Mullen Group ranked number three on Today’s Trucking Top 100 list in 2008 and the business generates more than $1.3 billion in annual revenues and is expected to reach operating earnings of $270 million in 2008.?
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