DBRS Comments on Requisition of Noranda Income Fund Special Meeting

DBRS notes today that Noranda Income Fund (the Fund) has announced that a requisition has been received requesting that Computershare Trust Company of Canada, the Fund trustee, call a special meeting of the unitholders of the Fund to consider removing from office all of the independent trustees of Noranda Operating Trust (Noranda Trust – the Fund’s wholly-owned subsidiary) currently in place and replacing them with trustees to be nominated by the requisitioning beneficial unitholders. The Fund also indicated that the board of trustees of Noranda Trust is reviewing the requisition together with its counsel. In a separate release dated August 27, 2010, West Face Capital Inc. and Clearwater Capital Management Inc. jointly announced that they and certain others, which in the aggregate hold or control in excess of 10% of the outstanding priority units issued by the Fund, have undertaken arrangements to requisition the special meeting.

The Fund has suspended distributions while it and Noranda Trust explore refinancing options for Noranda Trust’s revolving credit facility, which matures November 3, 2010, and its Senior Secured Notes, which mature December 20, 2010. In addition, the Fund has announced that on July 28, 2010, it entered into a non-binding letter of intent with Xstrata Canada Corporation (Xstrata Canada) with respect to a potential acquisition of all of the outstanding priority units of the Fund for cash consideration of $3.40 per priority unit.

Although a special meeting of the Fund’s unitholders has not been sanctioned as yet, DBRS believes that the prospect of a group of dissident unitholders clearly adds to the complexity of the refinancing efforts of the Fund and Noranda Trust now underway, by adding to the risk that the refinancing will not be completed in a timely manner. As we expect further announcements in the near term from the Fund or Noranda Trust regarding the request for a special meeting, the fate of the memorandum of understanding with Xstrata Canada and the refinancing efforts, DBRS has maintained the Fund’s STA-5 (low) stability rating Under Review with Negative Implications and the rating of Noranda Trust’s Senior Secured Notes at BBB with a Stable trend, pending further developments.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.