Trez Capital MIC is contemplating an extended liquidation process

Trez, a TSX-listed mortgage investment corporation, is proposing to maximize shareholder value through an “orderly wind-up plan,” under which it will allow its mortgages to mature or sell them before maturity at par. Provided it maintains its ITA status as a MIC throughout this process (as to which there is a risk factor disclosure), it can avoid corporate tax by distributing its net interest income and capital gains as taxable dividends (taxable as interest to the shareholders) or capital gains dividends (1/2 taxable to them).

The tax disclosure divides the process into three phases: initial disposition program; process of being wound-up; and wind-up. It discusses the prospect of receiving a return of the paid-up capital of $10 per share only in relation to the third phase – perhaps reflecting diffidence as to how long a period the “on the winding-up” process referred to in s. 84(2) can extend to.

Neal Armstrong. Summary of Circular of Trez Capital Mortgage Investment Corp. under Spin-offs & Distributions – Liquidations – Corporate liquidations.