Cliffside Capital Ltd. completes previously announced placement and formation of a new Special Purpose Limited Partnership
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TORONTO, July 14, 2021 / CNW / – Following its press releases from June 14 and July 9, 2021, Cliffside Capital Ltd. (“On the cliff side“or the”Company“) (TSXV: CEP) is pleased to announce the closing of its previously announced private placement of 22,500,000 units (“Units“), at $ 0.20 per Unit, to increase $ 4.5 million in gross product (hereinafter, the “Offer“) and the creation of its new private company with a specific vocation, C.AR. LP I (“CAR DRY“). Each unit is made up of one common 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 is exercisable for a period of three years at a price $ 0.20 per common share. Of the proceeds raised as part of the placement, Cliffside used $ 3.75 million to fund CAR LP, in which Cliffside will hold a 60% interest, with the remaining proceeds to be used for general working capital purposes.
Purchase of NPCALR
Cliffside also announces that it has enabled CAR LP to acquire the first $ 29 million tranche of non-prime consumer auto loan receivables (“NPCALR“) of ACC LP (the”Seller“) (which is controlled by CanCap Management Inc. (“CCMI“), a significant originator and manager of consumer loans and a non-arm’s length party of the Company) pursuant to the terms of the previously announced purchase agreement (the”Purchase agreement“) entered into between CAR LP, the seller and CCMI as of the date hereof. Pursuant to the terms of the purchase agreement, CAR LP may acquire up to approximately $ 180 million of NPCALR from time to time of the seller, over a period of next twelve months, in accordance with the term of the purchase contract.
CAR LP has funded, and will continue to fund, the purchases of NPCALR under the Purchase Agreement through a combination of: (i) drawings under a Loan and Guarantee Agreement (the “”Loan agreement“) entered into between CAR LP, a Schedule 1 bank and a private Canadian 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 invested $ 1.25 million). As a result of the above, Cliffside owns 60% of CAR LP, CCMI owns 20% of CAR LP and external investors own 20% of CAR LP.
In connection with entering into the loan agreement, CAR LP paid Harrison Equity Partners (“HEP“), a non-arm’s length portion of Cliffside, a structuring fee (the”Structuring costs“) of $ 968,000 (plus HST). These structuring fees were 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. LC Asset Management Corp. (“LCAM“), the external manager of Cliffside and a non-arm’s length party of the Company, will also continue to collect a management fee 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.
Cliffside CEO statement
“Today’s transaction marks another important milestone in the evolution of Cliffside’s business,” commented the CEO Steve malone. “We are fortunate to have the continued support of various Canadian lenders. This transaction adds two new lenders to our business and demonstrates our ability to continue reducing our cost of capital through the strong performance of our partnerships and our high credit standards. We are increasing our access to capital at good prices and increasing our sources of funding and our capital base, we will continue to grow and expand our business This current increase improves our profit margins while allowing us to continue to remain disciplined and attract the right mix of borrowers. We look forward to generating strong growth for our shareholders as we move forward with this new program as well as continuing to work with our existing partners. “
Transactions with non-arm’s length parties
As previously indicated, the transactions contemplated by the Purchase Agreement take place with non-arm’s length parties under the policies of the TSX Venture Exchange, as CCMI, ACC LP and LCAM are non-arm’s length parties of 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.
Payment of the structuring fees to HEP is considered to occur with a non-arm’s length party since HEP is 95% owned by Marc Newman, director of the Company.
Company insiders have subscribed $ 2.0 million units under the Offering, of which a total of $ 1.675 million was 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 has relied on exemptions from the formal minority assessment and approval requirements set out in sections 5.5 (b) and 5.7 (b) of Regulation 61-101 with respect to subscriptions for units by insiders in the framework 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 Regulation 61-101. The Company relied on the exemptions from the formal assessment and approval requirements of minority interests provided for in sections 5.5 (b) and 5.7 (c) (regarding paragraph (d) (i) of section 5.5) of the Regulation. 61-101 with respect to entering into the purchase agreement and carrying out the transactions contemplated therein, including the payment of fees to ACC LP and CCMI.
As required by the policies of the TSX Venture Exchange, the Company has sought and obtained the approval of disinterested shareholders for the transactions by written consent. The Company has also obtained conditional approval from the TSX Venture Exchange for trading and placement. The securities issued under the Offer are subject to a legal holding period of four months and one day from the date of issue.
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, without limitation, statements containing the words “will”, “may”, “expects”, “intends”, “anticipates” and other similar expressions that 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 offering, 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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