FMF Capital Completes IPO of Income Participating Securities

On March 24, 2005, FMF Capital Group Ltd. (FMF Capital) completed an initial public offering of 19,750,000 income participating securities (IPSs) for gross proceeds of $197,500,000. Each IPS represents one common share and C$6.524 aggregate principal amount of 14.5 per cent subordinated notes of FMF Capital. The IPS structure is designed for Canadian investors and provides monthly distributions, similar to those provided by income funds, in the form of dividends on the common share component of each IPS and interest on the note component of each IPS. In connection with the closing of the offering, FMF Capital also completed a private placement of approximately $22 million aggregate principal amount of separate subordinated notes to the Caisse de dépôt et placement du Québec. FMF Capital used the proceeds of the offering, together with the proceeds from the sale of the separate subordinated notes, to indirectly acquire an interest in FMF Capital LLC by acquiring all the outstanding class A common and preferred membership interests of FMF Holdings LLC, a holding company that holds all of the outstanding membership interests in FMF Capital LLC. FMF Capital acquired 60 per cent of all common membership interests, and 63.7 per cent of all preferred membership interests in FMF Holdings FMF Capital LLC is a residential mortgage lending company that originates and funds primarily non-conforming, or “non-prime”, mortgage loans in the US and sells those mortgage loans to institutional loan purchasers.

The offering of IPSs was underwritten by a syndicate of underwriters that was led by BMO Nesbitt Burns Inc., and included National Bank Financial Inc., TD Securities Inc., Canaccord Capital Corp., First Associates Investments Inc. and Sprott Securities Inc.

FMF Capital and its subsidiaries were represented by Goodmans LLP with a team that included Stephen Pincus, Grant McGlaughlin, Simon McGrath and Jill Nelson (corporate/securities), Mark Surchin and Cicely Leemhuis (banking), Susan Zimmerman (commercial/opinions) and Jon Northup (tax); and in the US by Jaffe Raitt Heuer & Weiss, PC with a team that included William Sider, Joel Alam, Peter Sugar and Lee Kellert (corporate/securities) and Marko Belej (tax) and Lise Barrera (banking). Bennet Koren and Meghan Renich of McGlinchey Stafford PLLC provided US regulatory advice to FMF Capital.

The underwriters were represented by Blake, Cassels & Graydon LLP with a team that included Jeffrey Lloyd, Brendan Reay and Erica Young (corporate/securities), Ken Snider and Kathleen Penny (tax) and Sam Principi (banking); and in the US by Goodwin Procter LLP with a team that included Laura Hodges Taylor and Yoel Kranz (corporate/securities) and Bill Whitledge, Mark Kirshenbaum and Timothy Becker (tax). Jeffrey Naimon and Clinton Rockwell of Buckley Kolar LLP provided US regulatory advice to the underwriters.

Chantal Joubert of Miller Thomson Pouliot represented the Caisse de dépôt et placement du Québec on the private placement of separate subordinated notes.