Cliffside Capital Ltd. provides more information regarding its planned private placement and the formation of a new Special Purpose Limited Partnership
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TORONTO, July 9, 2021 / CNW / – Following its press release from June 14, 2021, Cliffside Capital Ltd. (“On the cliff side“or the”society“) (TSXV: CEP) provides this update to provide more information regarding the planned placement of the Company (described below), the formation of a new Special Purpose Limited Partnership and the acquisition by this non-senior consumer auto loan partnership with an arm’s length party (as defined in Policy 1.1 of the TSX Venture Exchange), ACC LP (the “Seller“).
Placement of units and constitution of CAR LP I (“CAR DRY“)
As previously announced, Cliffside intends to issue 22,500,000 units (“Units“) on the basis of a private placement, $ 0.20 per Unit, to increase $ 4.5 million in gross product (hereinafter, the “Offer“), each unit being composed of one ordinary share in the capital of Cliffside (a”Ordinary share“) and one-quarter of a common share purchase warrant (each entire common share purchase warrant, a”To guarantee“). Each Warrant will be exercisable for a period of three years at a price $ 0.20 per common share. Of the proceeds raised under the Offer, Cliffside expects to use $ 3.75 million to fund its new special purpose private partnership, CAR LP, in which Cliffside will hold a 60% stake, with the remainder of the proceeds to be used for general working capital purposes. The proceeds of the offering are currently in escrow pending the approval of the TSX Venture Exchange for the offering and other transactions described below.
Purchase of NPCALR
Cliffside intends to have CAR LP acquire up to approximately $ 180 million non-prime consumer auto loan receivables (“NPCALR“) of the seller (which is controlled by CanCap Management Inc. (“CCMI“), a significant originator and manager of consumer loans and a party with which the Company does not deal at arm’s length). This purchase will be made in installments from time to time in accordance with the terms of a purchase agreement (the”Purchase agreement“) to be entered into between CAR LP, the Seller and CCMI on or about the closing date of the Offering. CAR LP intends to fund the purchases of NPCALR under the Purchase Agreement by way of a combination of: (i) withdrawals under the terms of a loan and guarantee agreement (the “Loan agreement“) to be entered into between CAR LP, a Schedule 1 bank and a Canadian private asset management company (collectively, the”Lenders“), which Loan Agreement authorizes advances of up to $ 175.2 million to CAR LP; (ii) $ 3.75 million the proceeds of the Offer; and (iii) additional equity capital raised directly in CAR LP in the amount of $ 2.50 million (in which CCMI invests $ 1.25 million). As a result of the above, Cliffside will own 60% of CAR LP, CCMI will own 20% of CAR LP and external investors will own 20% of CAR LP.
Any purchase under the Purchase Agreement can only be made during the term of the Loan Agreement, which has an initial term of one year, subject to any subsequent agreement to extend that term. Purchases under the Purchase Agreement will be made at fair market value of the applicable NPCALRs so purchased, at arm’s length. The method of determining the value has been approved by the lenders prior to such purchases. In connection with entering into the loan agreement, CAR LP has agreed to pay Harrison Equity Partners (“HEP“), a non-arm’s length portion of Cliffside, a structuring fee (the”Structuring costs“) of $ 968,000 (plus HST) upon entering into the loan agreement. These structuring fees are 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 contract, CCMI will be entitled to an origination charge equal to 1.5% of the value of each tranche of NPCALR purchased under the purchase contract and the seller will be entitled to an origination charge. Deferred purchases of 2.5% per annum payable monthly during the term of the loan agreement based on the value of the outstanding NPCALRs on the date of each such payment. The set-up fees described above and the deferred purchase fee payable to CCMI are the same as the same fees paid by the two existing Cliffside limited partnerships. LC Asset Management Corp. (“LCAM“), the external manager of Cliffside and a non-arm’s length party of the Company, will also continue to receive management fees by Cliffside for the continued provision of external management services by LCAM to Cliffside, calculated at the rate of 1.25 % of the carrying amount of Cliffside assets on an unconsolidated basis.
Transactions with non-arm’s length parties
The transactions contemplated by the Purchase Agreement are with non-arm’s length parties under the policies of TSXV because CCMI, ACC LP and LCAM are each an arm’s length party to the Company and CAR LP.
CCMI is an arm’s length party to the Company because the CEO and a director of the Company, Steve malone, is also the President and Chief Operating Officer of CCMI and because the Chief Financial Officer 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 Laurent Zimmering is the other 50% indirect owner of CCMI. ACC LP is a non-arm’s length party to the Company, as ACC LP is indirectly and equally owned by, Michael stein and Laurent Zimmering. Otherwise, Michael stein, Laurent Zimmering, Marc Newman and Steve malone each hold 25% of LCAM, which manages the Company. As a result of the foregoing, CCMI, ACC LP and LCAM are each an arm’s length party of CAR LP.
The payment of the structuring fees to HEP is considered to take place with a non-arm’s length party since HEP is 95% owned by Marc Newman, director of the Company.
Insiders of the Company have agreed to subscribe to $ 2.0 million units under the Offering, of which a total of $ 1.675 million will be subscribed by Michael stein, Laurent Zimmering, Steve malone and Marc Newman (the “Insider subscriptions“and, collectively, with the transactions contemplated by the Purchase Contract and the payment of the Structuring Commission, the”Transactions“). The aggregate $ 2.0 million subscriptions for units by insiders in connection with the placement are considered to be “related party transactions” within the meaning of policy 5.9 of the TSX Venture Exchange and of multilateral instrument 61-101 on the protection of holders of minority securities in special operations (“MI 61-101“). The Company intends to avail itself of the exemptions from the formal requirements for valuation and approval of minority interests provided for in sections 5.5 (b) and 5.7 (b) of Regulation 61-101 with respect to subscriptions for units by insiders. as part of the placement.
The purchase agreement, including the payment of origination charges and deferred purchase charges, is also considered a related party transaction within the meaning of TSX Venture Exchange Policy 5.9 and NI 61-101. The Company intends to avail itself of the exemptions from the formal assessment and approval requirements for minority interests provided for in Articles 5.5 (b) and 5.7 (c) (regarding paragraph (d) (i) of Article 5.5. ) of NI 61-101 with respect to entering into the Purchase Agreement and the completion of transactions contemplated therein, including the payment of fees to ACC LP and CCMI.
The Company seeks shareholder approval for transactions by written consent, which requires the approval of disinterested shareholders of the Company holding more than 50% of the ordinary shares not held by shareholders with a direct or indirect interest. in operations. Closing of transactions is subject to obtaining disinterested shareholder approval and TSXV approval.
Cliffside is focused on investing in strategic partnerships with parties who have specialized expertise and a proven track record in granting and managing loans and similar types of financial assets. Cliffside’s strategy is to generate income as an investor, offering its shareholders the opportunity to invest in the growing alternative lending industry with the potential for attractive returns and minimal operational risk while achieving a total return. reliable. For more information, visit www.cliffsidecapital.ca.
CAUTION REGARDING FORWARD-LOOKING INFORMATION:
This press release contains certain forward-looking statements, including, but not limited to, statements containing the words “will”, “may”, “expects”, “intends”, “anticipates” and d other similar expressions which constitute “forward-looking information” within the meaning of applicable securities laws. Forward-looking statements reflect the Company’s current expectations 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 contained in this press release include, without limitation, statements regarding the business and operations of Cliffside, the proposed use of the proceeds of the offering, Cliffside’s intention to complete the loan agreement to fund the operation of CAR LP and helping CAR LP raise additional capital; and the timing and closing of the offer, including the extent to which insiders of the Company may participate. Forward-looking statements are necessarily based on a number of estimates and assumptions which, although believed to be reasonable, are subject to known and unknown risks, uncertainties and other factors that may cause actual results and future events differ materially from those expressed or implied. by such forward-looking statements. These factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; results of operations; potential for conflicts of interest; and the price and volume volatility of Cliffside common stock. 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. Therefore, readers should not place undue reliance on forward-looking statements. Cliffside disclaims any intention or obligation to update or revise any forward-looking statement, 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.
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