Axis Auto Finance Inc. (“Axis” or the “Company”) (TSX: AXIS), is
pleased to announce that further to its press releases dated August
20, 2024 and May 15, 2024, the Company and its operating
subsidiaries involved in the Company's auto finance business have
entered into an asset purchase agreement with Fionic Canada Ltd.
("Fionic") and an affiliate of Fionic in respect of their
acquisition of the auto loan assets and undertaking of Axis through
the acquisition of certain assets and assumption of certain
liabilities of Axis and it subsidiaries relating to the Company's
auto finance business. The base purchase price for the assets is
approximately $114,000,000 (subject to adjustments for changes in
the composition of the auto loans assets and fair market value of
inventory since December 31, 2023). Fionic is an arm's length party
to Axis and its affiliates and the transaction was negotiated on an
arm's length basis.
The Company intends to mail a management information circular
("Circular") to shareholders in connection with a shareholders
meeting to be held in connection with the approval of the proposed
transaction in the coming weeks and expects to hold a meeting of
shareholders in late November. Additional details regarding the
terms and conditions of the transaction as well as the rationale
for the approvals made by the Special Committee and the Board will
be set out in the Circular which, together with the asset purchase
agreement, will be available under the Company's SEDAR+ profile at
www.sedarplus.ca.
Special Committee and Board Approval
The Company formed a special committee led by Wes Neichenbauer
and composed of two other independent directors of the Company to
assist with the Company's strategic review and the review of the
proposed transaction. After receiving a fairness opinion from Evans
& Evans, Inc. ("Evans & Evans"), with respect to the
consideration being received in respect of the proposed
transaction, the Special Committee unanimously recommended that the
board of directors of the Company (the "Board") approve the
proposed transaction. After receiving the fairness opinion from
Evans & Evans, legal and financial advice, the recommendation
of the Special Committee and after taking into account the
alternatives available to the Company, the Board unanimously
determined that the proposed transaction is in the best interests
of the Company and is fair to the Company's securityholders.
Shareholder and Debenture Holder Approval
Given that the proposed transaction involves the sale of all or
substantially all of the Company's assets, the transaction will
require the approval of two-thirds of votes cast by shareholders of
the Company at a meeting expected to be held in early December. In
connection with the execution of the agreement Axis has obtained
voting support agreements from the holders of approximately 47% of
the Company's outstanding shares pursuant to which they have
agreed, subject to the terms thereof, to vote in favour of the
proposed transaction.
In addition, as a condition to the closing of the transaction
the Company has obtained the approval of the requisite majority of
the holders of its outstanding debentures to revise the terms of
such debentures to provide for a redemption right that will allow
the Company to redeem the outstanding debentures (if the proposed
transaction closes on or before December 31, 2024) in exchange for
a payment equal to the outstanding interest owing up to the
redemption date and further payments against principal of between
80-85% percent of the principal amount thereof. The debentures at
issue are both the unsecured subordinated debentures issued on
September 11, 2023 (the "September 2023 Debentures") and the
7.5% Extendible Unsecured Convertible Subordinated Debentures
issued in April 2018 (the "April 2018 Debentures").
At present it is not anticipated that there will be any assets
remaining for shareholders following the repayment of amounts owing
to the Company's creditors and it is expected that the Company's
common shares will be delisted from the Toronto Stock Exchange
shortly following the closing.
Fairness Opinion
The Special Committee retained Evans & Evans to provide a
fairness opinion with respect to the fairness of the proposed
transaction from a financial standpoint to Axis and the
shareholders of Axis. Evans & Evans provided an opinion that,
based upon and subject to the assumptions, limitations and
qualifications contained in Evans & Evans' written fairness
opinion, the purchase price is fair, from a financial point of view
to the Axis shareholders. The fairness opinion will be included in
the Circular.
Related Party Transaction
Approximately $3,292,000 principal amount of debentures are held
by certain officers and directors of the Company or their
affiliates. Specifically $1,572,000 principal amount of the April
2018 Debentures are held by related parties (being $1,068,000 held
by affiliates of Wes Neichenbauer and $504,000 held by affiliates
of Todd Hudson) and $1,720,000 principal amount of the September
2023 Debentures are held by related parties (being $1,320,000 held
by affiliates of Ian Anderson and Paul Kerwin, $200,000 held by
affiliates of Wes Neichenbauer, $100,000 held by Ilja Troitschanski
and $100,000 held by Todd Hudson). Those related parties who are
also directors of the Company recused themselves from voting on the
approval of the amendments to the terms of the debentures. The
above referenced amendments to the April 2018 and September 2023
Debentures may be considered to be related party transactions for
the purposes of National Instrument 61-101 – Protection of Minority
Security Holders in Special Transactions and the Company will rely
on the exemptions from the valuation and minority approval
requirements contained in Sections 5.5(g) and 5.7(1)(e) of National
Instrument 61-101 (financial hardship), respectively.
Credit Agreement Update
Although the Company has not received a formal waiver of the
covenant breaches under its senior credit facility past October 1,
2024, the Company has received confirmation from its funding
syndicate that they are supportive of the proposed transaction. The
Company continues to work with its funders under the senior credit
facility to obtain a formal waiver that will extend to a date that
will permit the closing of the proposed transaction. One of funders
in the senior credit facility funding syndicate independently holds
the Master Loan Program Agreement (“MLPA”) funding facility, which
was also in covenant breach at the time the Company reported its
2024 fiscal year end financial results on September 27, 2024, and
this continues to be the case. The Company has received
confirmation from its MLPA funding partner that they are supportive
of the proposed transaction and continues to work with this funding
partner to obtain a formal waiver of the breach, that will permit
the closing of the proposed transaction. The Company will provide a
further update if and when formal waivers are obtained.
About Axis Auto Finance
Axis is a fintech lender providing alternative used vehicle
financing options to non-prime borrowers. Axis loans are offered
through automotive dealers to approximately 30% of Canadians
(Source: Equifax) that have credit scores in the non-prime range.
All Axis auto loans report to the credit bureau, resulting in over
70% of customers seeing a significant improvement of their credit
scores. Further information on the Company can be found at
https://www.axisfinancegroup.com/investors-press-releases/.
The TSX Exchange has neither approved nor disapproved the
contents of this press release. Neither the Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the Exchange) accepts responsibility for the adequacy
or accuracy of this release.
Notice Regarding Forward-Looking Statements
This news release contains forward-looking information and
forward-looking statements (collectively, "forward-looking
statements") within the meaning of applicable securities laws,
regarding the Company's business and operations. In this news
release, forward-looking statements relate to, among other things,
information regarding: (a) the terms and conditions of the proposed
asset sale transaction; (b) the satisfaction of the conditions
precedent to the proposed asset sale transaction, including
obtaining the requisite shareholder approval; (c) the timing and
completion of the closing of the proposed transaction; (d) the
timing of the proposed meeting of shareholders of the Company; (e)
expectations regarding the consideration to be paid to holders of
April 2018 Debentures and September 2023 Debentures; (f) the
Company's intention to cease to be listed on the TSX and; and (g)
waivers of defaults of the Company's credit facilities.
Forward-looking statements are necessarily based on a number of
estimates and assumptions that the Company considered appropriate
and reasonable as of the date such information is given, including
but not limited to the assumptions that the transaction will
proceed according to the Company's anticipated timelines; all
conditions to the closing of the transaction will be met; the
transaction will be completed on the terms currently contemplated;
the asset purchase agreement will not be terminated prior to
closing; and that required votes for shareholder approval of the
transaction and other matters to be considered at the shareholders
meeting will be obtained. Forward-looking statements are subject to
known and unknown risks, uncertainties, and other factors, many of
which are beyond the Company's control, that may cause actual
results, performance or achievements to be materially different
from those expressed or implied by such forward-looking statements,
including but not limited to the risk that the Company's
assumptions on which its forward-looking statements are based may
not be accurate; the inability to receive, in a timely manner and
on satisfactory terms, the necessary approvals for the transaction
and other matters to be considered at the meeting of shareholders
of the Company; the inability to satisfy, in a timely manner, all
other conditions to the completion of the transaction; the ability
of the Board to consider and approve, subject to compliance by the
Company of its obligations in this respect under the asset purchase
agreement, a superior proposal for the Company; and the risk
factors disclosed in the Company's periodic reports publicly filed
and available on its SEDAR+ profile at www.sedarplus.ca. The
anticipated dates indicated above may change for a number of
reasons, including delays in preparing materials in connection with
the transaction, the inability to receive the necessary approvals
in a timely manner, or the need for additional time to satisfy the
conditions to the completion of the transaction. No assurance can
be given that any of the events anticipated by the forward-looking
statements will transpire or occur. There is no assurance that the
proposed transaction will be completed in accordance with its terms
or at all. The forward-looking statements contained in this news
release are made as of the date of this announcement and the
Company does not undertake any obligation to update such
forward-looking statements, whether as a result of new information,
future events or otherwise, except as expressly required by
applicable law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241021232273/en/
For further information: Axis Auto Finance Inc. Todd Hudson CEO
(416) 633-5626 ir@axisautofinance.com
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