Speedy Sells 47 Properties

SMK Speedy International Inc. completed a portfolio sale of 47 of its 60 stores to Forum Leasehold Partners Inc. for an undisclosed amount on May 12, 2006. The transaction included a leaseback on a fully net net basis by Speedy, as tenant for an initial term of 20 years and various options to renew. An additional eight stores were sold to franchisees exercising rights of first refusal, which were triggered by the agreement of purchase and sale with Forum. The locations sold included both franchised and company-operated stores in six provinces: New Brunswick, Nova Scotia, Quebec, Ontario, Alberta and British Columbia, with the majority of the stores being in Ontario. Forum reserved certain development rights with respect to excess lands not used by Speedy in the operation of its automotive business pursuant to an operating agreement entered into as part of the transaction.

The company was, until January 2004, a publicly traded company when it was purchased by Minute Muffler and Brake, an Alberta private company. Minute Muffler and Brake is a leading automotive service specialist, which itself owns 115 stores in Canada, whose combined retail sales are in excess of $60 million annually. Speedy was one of the first exhaust replacement specialists in North America, opening its first store in Toronto in 1956 and at one time also operating in the United States, Europe and South Korea. Currently, Speedy has 79 company-operated and 39 franchised stores with combined retail sales in excess of $70 million. Together, the Speedy and Minute Muffler group is the largest provider of automotive services in Canada and competes effectively with the only other national after-market chain competitor, Midas International.

In order to complete the transaction, Speedy obtained the consent of the holders of a majority of the senior notes of the company issued pursuant to a January 7, 2004 trust indenture between Computershare Trust Company of Canada as trustee and a predecessor of the company (Speedy resulted from the reorganization of various companies pursuant to a plan of arrangement made on the same date) and the consent of its operating lender, Bank of Montreal, both of whom discharged their security registered against the assets and undertaking of the company, including its real property assets. Speedy entered into a new $8 million term loan with Fortress Investment Group ULC.

Peter Hatges, senior vice-president and director at KPMG Corporate Finance Inc. and a partner of KPMG, LLP, the lead financial advisor to Speedy, was responsible for the financial analysis, the replacement debt financing and working out the arrangements with the senior noteholders, as well as with Bank of Montreal, the existing lender. Jim Poapst, president of KPMG Realty Inc., was responsible for structuring and brokering the real estate deal. The KPMG team included Yen-Mei Li and Umang Patel.

Lead counsel for Speedy on this transaction was Blake, Cassels & Graydon LLP's Jim Hilton and Dorothy Wahl, assisted by Lauren Temple. Also representing Speedy were Rob Wortzman and Chris Partridge of Wildeboer Dellelce LLP, its corporate counsel, with respect to various matters including the Fortress financing. Forum Leasehold Partners Inc. retained Mike Smith and Hayden Solomons (real estate), Barb Worndl and Carol Burns (tax), Robb English (financial services) and Margaret Nelligan (corporate) of Aird & Berlis LLP to act on its behalf.

Howard Steinberg, managing director of Fortress Investment Group ULC, led the debt financing team, represented by Sam Billard at Aird & Berlis LLP and assisted by Christie McNeill and Fiona Hickman. Tom Hunter at Fraser Milner Casgrain LLP and Bruce Bell at Cassels Brock & Blackwell LLP played active roles for Bank of Montreal and the senior noteholders, respectively. Forum financed the acquisition with first mortgage financing obtained by Sun Life Assurance Company of Canada and mezzanine financing by KingStreet Real Estate Mortgage LP No. 1.

Sun Life retained Richard C. Bogart and George “Bunk” Robertson of Bogart Robertson & Chu and KingStreet retained Simon Crawford of Bennett Jones LLP. Local counsel included Tasha Lackman of Fasken Martineau DuMoulin LLP and Nicole Cloutier of Osler, Hoskin & Harcourt LLP (Quebec), Doug Mathews, Q.C., and Allison McCarthy of Stewart McKelvey (Nova Scotia and New Brunswick) and E. “Sonny” Mirth, Q.C., of Reynolds Mirth Richards & Farmer LLP.