Nexen has agreed to purchase $40,000,000 aggregate principal amount of 8.00% Convertible Unsecured Subordinated Debentures at a price of $1,000 per debenture by way of private placement to an accredited investor in accordance with applicable securities laws from Canexus Income Fund (the "Fund"). These Debentures will be purchased concurrently with completion of a "bought deal" between the Fund with a syndicate of underwriters pursuant to which the Fund will issue, subject to regulatory approval, 8.00% Convertible Unsecured Subordinated Debentures at a price of $1,000 per debenture for total gross proceeds of $46,000,000. For further details refer to the Press Release of Canexus Income Fund dated August 11, 2009.
The Nexen Debentures will be convertible into Exchangeable Limited Partnership Units ("Exchangeable LP Units") of Canexus Limited Partnership ("Canexus LP"), which are exchangeable into trust units of the Fund ("Trust Units") on a one for one basis. Nexen currently owns 63,493,414 Exchangeable LP Units which are exchangeable for 65.56% of the outstanding Trust Units (after taking into account the exchange of all outstanding Exchangeable LP Units for Trust Units). If the Nexen Debentures were converted into Exchangeable LP Units and those Exchangeable LP Units were then exchanged into Trust Units, Nexen would acquire ownership of an additional 7,843,137 Trust Units, which would increase Nexen's ownership interest by 2.58% to approximately 68.14% of the outstanding Trust Units (calculated on a partially diluted basis allowing for conversion of the Nexen Debentures but not of any other outstanding convertible securities of the Fund). On a pro forma, fully diluted basis, the purchase of the Nexen Debentures would result in Nexen owning approximately 62.7% of the Trust Units.
Given the total proceeds of the debenture offerings by the Fund and Nexen's participation in the transaction, Nexen has informed Canexus that it will no longer participate in the Distribution Reinvestment Plan ("DRIP") commencing with the distribution payable on or about October 15, 2009.
Nexen's agreement to purchase the Nexen Debentures which gave rise to the requirement to file this report was made by Nexen in furtherance of its continued investment in Canexus LP and the Fund. Nexen may in the future increase or decrease its holdings as it may deem appropriate in light of the circumstances then existing.
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