June 12, 2009 / 3:00 PM / 9 years ago

UPDATE 1-Home Equity Income Trust to convert to Homeq Corp

* To convert to a dividend-paying corporation on June 30

* Each trust unit to be exchanged for a Homeq common share

June 12 (Reuters) - Canada’s Home Equity Income Trust HEQ_u.TO said it would convert to a dividend-paying corporation called Homeq Corp on June 30.

Home Equity said each trust unit would be exchanged for one common share of Homeq.

Trusts had been given a tax break in return for distributing the bulk of their cash to investors. However, in 2006, the federal government became concerned about the loss of taxes because of the format’s popularity and gave trusts five years to convert to normal corporations.

Home Equity said the conversion is part of its plan to continue its operating subsidiary, Canadian Home Income Plan Corp (CHIP), as a bank called HomEquity Bank.

It also said it would pay a final cash distribution of 12 Canadian cents per unit on June 29. The trust had been paying a monthly distribution of 6 Canadian cents per unit.

Homeq plans to pay a quarterly dividend of 7 Canadian cents per share and expects to pay the first quarterly dividend to holders of record on Sept. 30.

Home Equity units were down 9 Canadian cents at C$5.70 in Friday morning trade on the Toronto Stock Exchange. (Reporting by R. Manikandan in Bangalore; Editing by Anne Pallivathuckal)

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