Clearwater Seafoods units plunge on distribution halt

Units of the Clearwater Seafoods Income Fund lost more than a third of their value Wednesday after it announced it would suspend monthly distributions for the rest of 2005.

Clearwater said a stronger Canadian dollar had reduced margins and led to less cash available for distribution for the remainder of the year.

It also blamed a lower scallop total allowable catch in 2005 as well as higher costs because of unexpected repairs to its boats.

Clearwater units dropped $1.90 to close at $3.55 on the TSX. The units had dipped as low as $2.25 in earlier trading.

"The initiatives on price increases, the investment in our clam business, growing our new raw lobster business and investing in more frozen-at-sea scallop vessels are multi-year initiatives and the returns from them will be reflected over several years," said Colin MacDonald, the chief executive officer of Clearwater Seafoods Limited Partnership, in a release.

"We expect that the above initiatives combined with fewer disruptions to our fleet and higher average prices on some of our core products will benefit 2006 and future years," he said.

The fund said it would update its situation in early November when it next reports financial results.

Clearwater Fine Foods also announced it would not go ahead with a bid for up to 10 million units of the Clearwater Seafoods Income Fund.

"After carefully considering our options, given the significant change that has occurred in the income fund market since our bid was announced, we have decided to withdraw the bid," Clearwater Fine Foods CEO John Risley said.

"We continue to have confidence in the fund, its management and its underlying business."