Park Lawn Income Trust (TSXV:PLC.UN) is converting into a corporation that will continue to make monthly payments as dividends, the cemetery operator announced Wednesday.
The change is being made ahead of a change in federal tax rules for income trusts, which have been phased in since they were announced October 2006. The new taxation regime will be applied to trusts like Park Lawn next January.
Park Lawn indirectly owns six cemeteries in the Toronto area and an interest in Blookpark Developments Inc.
The trust said the change will be done through a transaction involving its operating company Park Lawn Company Ltd. (PLCL), LMS Medical Systems Inc., and a wholly owned subsidiary codenamed Subco.
Holders of Park Lawn units will be exchanged, on a tax-free basis, for common shares of PLCL. The exchange ratio has yet to be determined. All of Parkland's assets will be transferred to Subco, which will merge with the new corporation
LMS will receive cash and PLCL common shares valued at $1.4 million in return for its shares of Subco.
Park Lawn's monthly distribution will continue at 5.5 cents per unit until the transaction is completed. It expects to continue monthly payments in the form of dividends after the conversion.
"The conversion will also enable Park Lawn to pursue strategic growth opportunities in the United States and internationally which are limited by our current structure," said Frank Mills, the CEO of Park Lawn's general partner.
There was a trading halt issued Wednesday for the trust's units. Park Lawn last traded at $6.10 on Feb. 26.
