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TORONTO, July 9, 2021 /CNW/ - Further to its press release
of June 14, 2021,
Cliffside Capital Ltd. ("Cliffside" or the
"Corporation") (TSXV: CEP) is providing this update to give
more information regarding the Corporation's planned Offering
(described below), formation of a new special purpose limited
partnership and the acquisition by that partnership of non-prime
consumer automobile loans from a non-arm's length party (as defined
in TSXV Policy 1.1), ACC LP (the "Vendor").
Offering of Units and Formation of C.A.R. LP I ("CAR
LP")
As previously announced, Cliffside intends to issue 22,500,000
units ("Units") on a private placement basis, at
$0.20 per Unit, to raise $4.5 million in gross proceeds (herein, the
"Offering"), with each Unit comprised of one common share in
the capital of Cliffside (a "Common Share") and one-quarter
of one Common Share purchase warrant (each whole Common Share
purchase warrant, a "Warrant"). Each Warrant will be
exercisable for a three-year period at a price $0.20 per Common Share. Of the proceeds raised
under the Offering, Cliffside expects to use $3.75 million to fund its newly formed special
purpose private partnership, namely CAR LP, of which Cliffside will
hold a 60% equity interest, with the remaining proceeds to be used
for general working capital purposes. The proceeds from the
Offering are currently being held in escrow pending TSXV approval
to the Offering and the other transactions described below.
Purchase of NPCALRs
Cliffside intends to cause CAR LP to acquire up to approximately
$180 million of non-prime consumer
auto loan receivables ("NPCALR") from the Vendor (which is
controlled by CanCap Management Inc. ("CCMI"), a leading
consumer loan originator and servicer and a non-arm's length party
of the Company). This purchase will be completed in tranches from
time to time pursuant to the terms of a purchase agreement (the
"Purchase Agreement") to be entered into among CAR LP,
the Vendor and CCMI to be dated on or about the date of
closing of the Offering. CAR LP intends to finance purchases of
NPCALRs under the Purchase Agreement through a combination of: (i)
drawdowns under the terms of a loan and security agreement (the
"Loan Agreement") to be entered into among CAR LP, a
Schedule 1 Bank and a private Canadian asset management firm
(collectively, the "Lenders"), which Loan Agreement
authorizes advances of up to $175.2
million to CAR LP; (ii) $3.75
million of the proceeds of the Offering; and (iii)
additional equity being raised directly in CAR LP in the amount of
$2.50 million (of which CCMI is
investing $1.25 million). As a
result of the foregoing, Cliffside will own 60% of CAR LP, CCMI
will own 20% of CAR LP and external investors will own 20% of CAR
LP.
Any purchases under the Purchase Agreement may only be completed
during the term of the Loan Agreement, which has an initial term of
one year, subject any subsequent agreement to extend such term. The
purchases under the Purchase Agreement will be completed at the
fair market value of the applicable NPCALRs so purchased, based on
arms' length terms. The method of determining value has been
approved by the Lenders in advance of any such purchases. In
connection with the entering into of the Loan Agreement, CAR LP has
agreed to pay Harrison Equity Partners ("HEP"), a non-arm's
length party of Cliffside, a structuring fee (the
"Structuring Fee") of $968,000 (plus HST) upon the consummation of the
Loan Agreement. Such Structuring Fee is payable to HEP in
connection with the provision of debt raising and capital formation
services provided to CAR LP by HEP.
Pursuant to the terms of the Purchase Agreement, CCMI will be
entitled to an origination fee equal to 1.5% of the value of each
tranche of NPCALRs purchased under the Purchase Agreement and
the Vendor will be entitled to a 2.5% per annum deferred purchase
fee payable on a monthly basis over the term of the Loan Agreement
based on the value of the NPCALRs outstanding as at the date
of each such payment. The above described origination fee and
deferred purchase fee payable to CCMI are identical to the same
fees paid by Cliffside's existing two limited partnerships.
LC Asset Management Corp. ("LCAM"),
Cliffside's external manager and a non-arm's length party of the
Company, will also continue to be paid a management fee by
Cliffside for LCAM's continued provision of external management
services to Cliffside, calculated at the rate of 1.25% of the book
value of Cliffside's assets on an unconsolidated basis.
Transactions with Non-Arm's Length Parties
The transactions contemplated by the Purchase Agreement are
taking place with non-arm's length parties under the Policies of
the TSXV because each of CCMI, ACC LP and LCAM is a non-arm's
length party of the Company and CAR LP.
CCMI is a non-arm's length party to the Company because the CEO
and a director of the Company, Steve
Malone, is also the President and COO of CCMI and because
the CFO of the Company, Praveen
Gupta, is also the CFO of CCMI. In addition, CCMI is a
non-arm's length party to the Company because Michael Stein is an indirect 50% owner of CCMI
and is a director and control person of the Company while
Lawrence Zimmering is the other 50%
indirect owner of CCMI. ACC LP is a non-arm's length party to the
Company because ACC LP is indirectly, and equally owned by,
Michael Stein and Lawrence Zimmering. Furthermore,
Michael Stein, Lawrence Zimmering, Mark
Newman and Steve Malone each
own 25% of LCAM, which manages the Company. As a result of the
foregoing, each of CCMI, ACC LP and LCAM is also a non-arm's length
party of CAR LP.
The payment of the Structuring Fee to HEP is considered to take
place with a non-arm's length party since HEP is 95% owned by
Mark Newman, a director of the
Company.
Insiders of the Corporation have agreed to subscribe for
$2.0 million of Units under the
Offering, of which an aggregate of $1.675
million will be subscribed for by Michael Stein, Lawrence
Zimmering, Steve Malone and
Mark Newman (the "Insider
Subscriptions" and, collectively, with the transactions
contemplated by the Purchase Agreement and the payment of the
Structuring Fee, the "Transactions"). The aggregate
$2.0 million of subscriptions of
Units by insiders under the Offering are considered "related
party transactions" within the meaning of TSXV Policy 5.9 and
Multilateral Instrument 61-101 Protection of Minority Security
Holders in Special Transactions ("MI 61-101"). The
Corporation intends to rely on exemptions from the formal valuation
and minority approval requirements in sections 5.5(b) and 5.7(b) of
MI 61-101 in respect of the subscriptions of Units by insiders
under the Offering.
The Purchase Agreement, including the payment of the origination
fee and deferred purchase fee is also considered a related party
transaction within the meaning of TSXV Policy 5.9 and MI 61-101.
The Corporation intends to rely on exemptions from the formal
valuation and minority approval requirements in sections 5.5(b) and
5.7(c) (re paragraph (d)(i) of Section 5.5) of MI 61-101 in
respect of the entering into of the Purchase Agreement and the
completion of the transactions contemplated therein, including
payment of fees to ACC LP and CCMI.
The Company is seeking shareholder approval for the Transactions
by way of written consent, which requires the approval of
disinterested shareholders of the Company holding greater than 50%
of the Common Shares not held by those shareholders with a direct
or indirect interest in the Transactions. The closing of the
Transactions is subject to receipt of such disinterested
shareholder approval and the approval of the TSXV.
About Cliffside
Cliffside is focused on investing in strategic partnerships with
parties who have specialized expertise and a proven track record in
originating and servicing loans and similar types of financial
assets. Cliffside's strategy is to generate revenue as an investor,
affording its shareholders an opportunity to invest in the growing
alternative lending sector with the potential for attractive yields
and minimal operational risk while earning a reliable total return.
For more information, visit www.cliffsidecapital.ca.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION:
This news release contains certain forward-looking
statements, including, without limitation, statements containing
the words "will", "may", "expects", "intends", "anticipates" and
other similar expressions which constitute "forward-looking
information" within the meaning of applicable securities laws.
Forward-looking statements reflect the Company's current
expectation and assumptions, and are subject to a number of risks
and uncertainties that could cause actual results to differ
materially from those anticipated. Forward-looking statements in
this news release include, but are not limited to, statements with
respect to the business and operations of Cliffside, the proposed
used of proceeds of the Offering, Cliffside's intention to finalize
the Loan Agreement to fund CAR LP's operation and assist CAR LP
raise additional capital, and the timing and closing of the
Offering, including the extent to which insiders of the Company may
participate. Forward-looking statements are necessarily based upon
a number of estimates and assumptions that, while considered
reasonable, are subject to known and unknown risks, uncertainties,
and other factors which may cause the actual results and future
events to differ materially from those expressed or implied by such
forward-looking statements. Such factors include, but are not
limited to: general business, economic, competitive, political and
social uncertainties; the results of operations; potential for
conflicts of interests; as well as volatility of Cliffside's common
share price and volume. There can be no assurance that such
statements will prove to be accurate or complete, as actual results
and future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue
reliance on forward-looking statements. Cliffside disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Cliffside Capital Ltd.
