GMP Capital Corp. is proposing to convert the firm into an income trust.

GMP announced today that its board of directors has approved in principle the initiation of a conversion process by way of a plan of arrangement. Current shareholders of GMP would exchange their common shares for units of a newly formed income trust.

GMP believes that an income trust structure could provide incremental benefit to both the company and its shareholders. It is anticipated that the business and operations of GMP would be unaffected by the reorganization.

Some of the reasons considered for converting GMP to an income trust are:

  • the conversion should provide increased tax efficiencies for GMP and its shareholders;
  • monthly cash distributions are anticipated to provide an attractive return to unitholders without impairing GMP’s ability to sustain its existing business and finance future growth initiatives; and
  • with the current broad investor demand for income trusts, the conversion may provide increased liquidity for shareholders of GMP.

“These benefits also could result in units of the Fund providing a stronger currency than the shares of GMP that could help to facilitate future growth,” GMP said in a news release.

GMP say members of its executive committee first presented a conversion proposal to the board of directors on July 14, The executive committee reported back to the directors of GMP late yesterday that the conversion of GMP to an income trust structure would be technically feasible.

The company’s board has unanimously approved the proposed conversion in principle and has authorized and directed the GMP executive committee to pursue and negotiate the transaction.

The conversion, if pursued, would also be subject to approval of at least 66 2/3% of the votes cast by the company’s shareholders at a meeting of shareholders called for that purpose and court approval. The conversion would also be subject to certain regulatory approvals.

GMP anticipates that with shareholder approval the conversion could be completed by November 2005.

The exchange of GMP shares for units by shareholders generally would be a taxable transaction.

GMP Capital Corp. has three subsidiaries: GMP Securities Ltd., Griffiths McBurney Corp. and GMP Private Client Ltd. GMP Securities Ltd. is a leading independent Canadian investment dealer focused on investment banking and institutional equities for corporate clients and institutional investors.