Hardwoods Distribution Income Fund renews C$24.5M credit facility available to U.S. subsidiary Hardwoods Speciality Products

LANGLEY, British Columbia , May 26, 2011 (press release) – Hardwoods Distribution Income Fund (the "Fund") (TSX: HWD.UN) today announced the renewal of the $24.5 million (US$25 million) revolving credit facility available to the Fund's U.S. operating subsidiary, Hardwoods Speciality Products USLP ("Hardwoods USLP"). The Fund owns an 80% indirect interest in Hardwoods USLP.

The renewed revolving credit facility is for a four year term, expiring May 26, 2015. Highlights of the facility renewal include:

  • Hardwoods USLP may terminate the facility at any time without prepayment penalty
  • The rate of interest charged for Prime-based borrowings was reduced to Prime plus 50 basis points (previously Prime plus 250 bps)
  • The rate of interest charged for LIBOR-based borrowings was reduced to LIBOR plus 200 basis points (previously LIBOR plus 400 bps, with a 1.0% LIBOR minimum)
  • Standby fees charged on unused borrowing availability was reduced to 25 basis points (previously 50 bps)
  • The extent to which Hardwoods USLP is permitted to borrow against the book value of inventory was increased to 55% (previously 50%)
  • Hardwoods USLP remains subject to a fixed charge coverage ratio (as defined in the credit agreement) of not less than 1.0 to 1, however under the terms of the renewal this covenant shall not apply so long as the unused availability under the credit line is in excess of US$2.5 million (previously US$4.0 million)
  • No closing fee was paid related to the credit facility renewal, however Hardwoods USLP shall pay an annual administrative fee of $15,000 to the bank
All other terms of the renewed credit facility are substantially unchanged from Hardwoods USLP's previous revolving credit facility as described in the Fund's Annual Information Form dated March 24, 2011, which is available on www.sedar.com.

"We continue to enjoy strong service from our U.S. bankers, who are familiar with and support our business model," commented Lance Blanco, Hardwoods' President and CEO. "We are pleased to have renewed our credit arrangements on more favourable terms with them for another four years. Hardwoods will benefit from improved borrowing rates, a more flexible covenant, and an enhanced calculation of our borrowing base under this U.S. credit facility. Combined with our Canadian credit facility, we have significant unused borrowing capacity available for Hardwoods to pursue its market expansion strategy," said Blanco.

About the Fund

The Fund is an unincorporated, open-ended, limited purpose trust established to hold, indirectly, securities which represent an 80% ownership interest in Hardwoods.

About Hardwoods

Hardwoods is one of North America's largest distributors of high-grade hardwood lumber and sheet goods to the cabinet, moulding, millwork, furniture and specialty wood products industries. The company currently operates a network of 26 distribution centers in the U.S. and Canada.

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