~Montfort acquires one of Canada's leading private providers of
residential mortgages focused on Ontario and British Columbia~
VANCOUVER, BC, Aug. 16,
2022 /CNW/ - Montfort Capital Corporation
("Montfort" or the "Company") (TSXV: MONT) (OTCQB: MONTF), a
leading innovator of technology in private credit, is pleased to
announce that it has entered into a definitive share purchase
agreement (the "Acquisition Agreement") with Kenneth Thomson, The Kenneth Thomson Business
Trust (2020), Universal Financial Corp., Blake Albright, The Albright (2020) Family
Trust, GreatBlake Holdings Inc., Sabrina
Kyle, The Sabrina Prudham (2020) Family Trust, 2753655
Ontario Inc. and Reap Equity Corp. (collectively, the
"Vendors") in connection with its previously announced
acquisition of Brightpath Capital Corporation ("Brightpath
Capital"), Brightpath Servicing Corporation ("Brightpath
Servicing"), and Brightpath Residential Mortgage LP I
("Brightpath Mortgage LP", together with Brightpath Capital
and Brightpath Servicing, "Brightpath"), as well as certain
holding corporations owned by the Vendors (the
"Transaction"). Immediately following the execution of the
Acquisition Agreement, the parties successfully completed the
Transaction and Montfort has
acquired Brightpath. Pursuant to the Transaction, Montfort has acquired all the outstanding
common shares of Brightpath Capital Corporation and Brightpath
Servicing, and all of the outstanding limited partnership units of
Brightpath Residential Mortgage LP I.
Brightpath is one of Canada's
leading private providers of residential mortgages focused on
Ontario and British Columbia. Brightpath has grown
significantly over the past 10 years by offering private credit to
individuals who are self-employed, experiencing credit issues, or
looking at real estate renovation or development projects and
expects to accelerate its growth through the combination with
Montfort. The Brightpath
management team will continue to operate the mortgage lending
company after the completion of the Transaction.
"Brightpath significantly increases our size and profitability
and opens our private credit business model to the lucrative
real-estate mortgage markets in Canada," said Mike
Walkinshaw, CEO of Montfort "Montfort began as a specialist
in SaaS revenue based lending but has quickly grown to offering a
broad spectrum of specialized private credit opportunities to
Canadian investors. Our technology driven loan origination and
underwriting platform allows us to offer scalability and
transparency to other vertical segments of the private credit
industry, opening up a traditionally restricted asset class to a
broader range of investors."
The purchase price of the acquisition was $30.5 million comprised of a combination of
31,250,000 common shares (at a deemed price of $0.40 per common share) and 18,000,000 series A
preferred shares (at a deemed value of $1.00 per preferred share). The Acquisition
Agreement provides that the consideration securities issued to the
Vendors are subject to restrictions on transfer and resale in
accordance with the following schedule: 10% on the date that is
four months from the closing date; 20% on the date that is six
months from the closing date; 30% on the date that is nine months
from the closing date; and the remaining 40% on the date that is 12
months from the closing date.
In addition, in connection with the Transaction, the Company has
entered into voting agreements with Kenneth
Thomson ("Thomson"), The Kenneth Thomson Business
Trust (2020) ("Thomson Trust"), Universal Financial Corp.
("Universal", together with Thomson and Thomson Trust, the
"Thomson Vendors"), Blake
Albright ("Albright"), GreatBlake Holdings Inc.
("GreatBlake"), The Albright (2020) Family Trust
("Albright Trust", together with Albright and GreatBlake,
the "Albright Vendors"), Sabrina
Kyle ("Kyle"), The Sabrina Prudham (2020) Family
Trust ("Prudham Trust"), 2753665 Ontario Inc. ("275",
together with Kyle and Prudham Trust, the "Prudham
Vendors"), and Fiona Elder,
where, among other things, these parties agree to vote the Common
Shares held by them in favour of matters proposed by the management
of the Company for a period of 24 months, subject to certain
standard exceptions. In addition, the Vendors have agreed not
to exercise or convert any convertible securities held by them
where such exercise or conversion would result in them owning or
exercising control or direction over 20% of the common shares of
the Company, unless applicable shareholder and TSXV approval is
obtained.
The Company is also pleased to announce that Blake Albright has been appointed as a director
and Chief Capital Officer of the Company and has entered into an
executive employment agreement with the Company.
"Bringing Montfort and
Brightpath together is a logical next step that creates substantial
value for our customers and investors alike," said Blake Albright, the new Chief Capital Officer of
the Company. "Our combined resources make us stronger financially,
allowing us to position ourselves as a leader in the rapidly
growing private lending space. I am very excited to be working at
the forefront of this fantastic opportunity."
Also, in connection with closing the Transaction, the Company
has granted a total of 5,300,000 performance share units ("PSUs")
and 900,000 stock options to certain officers and employees of the
Company or its subsidiaries under its equity incentive plan dated
April 27, 2022 (the "Plan").
The PSUs granted will vest depending on the extent the Common
Share's five-day volume-weighted average price ("VWAP")
exceeds $1.00 on the TSXV on the
36th month anniversary of the date hereof (the
"Performance Period"), up to a full vesting of the PSUs in the
event the Common Share's five-day VWAP is at or exceeds
$5.00 at the end of the Performance
Period. Each vested PSU will convert into one Common Share, or the
cash equivalent thereof, at the election of the Board. The stock
options granted are exercisable at $0.40 per Common Share for five years from the
data of grant and will vest daily in equal installments for three
years until all options have vested to the recipient. Following the
award of the PSUs and stock options, there are 5,300,000
performance share units and 6,125,000 stock options outstanding
under the Plan.
Early Warning
In connection with the closing of the Transaction, the Thomson
Vendors acquired 12,500,000 common shares and 4,000,000 preferred
shares. The Thomson Vendors are directly or indirectly owned or
controlled by Thomson. Prior to the completion of the Transaction,
Thomson owned and controlled 5,000,000 common shares and 3,500,000
preferred shares, as well as 180,000 stock options entitling
Thomson to acquire an additional 180,000 common shares.
Thomson now owns and/or controls an aggregate of 17,500,000
common shares and 7,500,000 preferred shares entitling Thomson to
acquire an additional 7,500,000 common shares in the event of
conversion thereof, 180,000 stock options entitling Thomson to
acquire an additional 180,000 common shares, and 1,200,000 PSUs
entitling Thomson to acquire an additional 1,200,000 common shares
upon vesting and achievement of certain performance goals,
representing approximately 19.2% of the issued and outstanding
common shares (or approximately 26.4% calculated on a partially
diluted basis, assuming the conversion of the 7,500,000 preferred
shares, 1,200,000 PSUs and 180,000 stock options.)
Pursuant to the Transaction, the Company entered into a voting
agreement with the Thomson Vendors, whereby these parties agreed to
vote common shares held by them in favour of matters proposed by
the management of the Company for a period of 24 months, subject to
certain standard exceptions. In addition, the Thomson Vendors have
agreed not to exercise of convert any convertible securities held
by them where such exercise or conversion would result in them
owning or exercising control or direction over 20% of the common
shares of the Company, unless applicable shareholder and TSXV
approval is obtained.
The securities were acquired in a private transaction which did
not take place through the facilities of any market for the
Company's securities. This transaction was effected for investment
purposes and Thomson could increase or decrease his investment in
the Company at any time, or continue to maintain his current
investment position, depending on market conditions or any other
relevant factor. The securities were acquired for the consideration
described above in this news release.
In connection with the closing of the Transaction, the Albright
Vendors acquired 17,500,000 common shares and 8,000,000 preferred
shares. The Albright Vendors are directly or indirectly owned or
controlled by Albright. Prior to the completion of the Transaction,
Albright owned and controlled no securities of the Company.
Albright now owns and/or controls an aggregate of 17,500,000
common shares and 8,000,000 preferred shares entitling Albright to
acquire an additional 8,000,000 common shares in the event of
conversion thereof and 1,200,000 PSUs entitling Albright to acquire
an additional 1,200,000 common shares upon vesting and achievement
of certain performance goals, representing approximately 19.2 % of
the issued and outstanding common shares (or approximately 26.6%
calculated on a partially diluted basis, assuming the conversion of
the 8,000,000 preferred shares and 1,200,000 performance share
units.)
Pursuant to the transaction, the Company entered into a voting
agreement with the Albright Vendors, whereby these parties agreed
to vote common shares held by them in favour of matters proposed by
the management of the Company for a period of 24 months, subject to
certain standard exceptions. In addition, the Albright Vendors have
agreed not to exercise of convert any convertible securities held
by them where such exercise or conversion would result in them
owning or exercising control or direction over 20% of the common
shares of the Company, unless applicable shareholder and TSXV
approval is obtained.
The securities were acquired in a private transaction which did
not take place through the facilities of any market for the
Company's securities. This transaction was effected for investment
purposes and Albright could increase or decrease his investment in
the Company at any time, or continue to maintain his current
investment position, depending on market conditions or any other
relevant factor. The securities were acquired for the consideration
described above in this news release.
This portion of this news release is issued pursuant to National
Instrument 62-103 – The Early Warning System and Related Take-Over
Bid and Insider Reporting Issues, which also requires an early
warning report to be filed on SEDAR (www.sedar.com) containing
additional information with respect to the foregoing matters. A
copy of the related early warning report may be obtained on the
Company's SEDAR profile or by contacting Thomson at 25 Price
Street, Toronto, Ontario M4W 1Z1,
Attention: Kenneth Thomson or
Albright at : 9 King Street North, Waterloo, Ontario N2J 2W6. The head office
of Montfort is located at Suite
835 - 1100 Melville Street, Vancouver,
British Columbia, V6E 4A6.
Related Party
Transaction
Multilateral Instrument 61-101 - Protection of Minority Holders
in Special Transactions ("MI 61- 101") was adopted by the Ontario
Securities Commission, the Alberta Securities Commission and
certain other securities regulatory authorities in Canada to govern transactions that raise the
potential for conflicts of interest and that may affect the
interests of minority securityholders.
MI 61-101 is intended to regulate insider bids, issuer bids,
business combinations and related party transactions to ensure
equality of treatment among securityholders, generally by requiring
enhanced disclosure, minority securityholder approval, and, in
certain instances, independent valuations, as well as approval and
oversight of certain transactions by a special committee of
independent directors.
Under MI 61-101, a "related party" of an entity includes, among
others, a control person of the entity, directors and senior
officers of an entity, as well as shareholders holding over 10% of
the voting rights attached to the voting securities of the Company
(a "Related Party").
Thomson is a director and beneficial shareholder of both the
Company and Brightpath. In addition, Thomson indirectly owned or
controlled approximately 33% of Brightpath Capital, Brightpath
Servicing and a material limited partnership interest in Brightpath
Mortgage LP (together the "Brightpath Securities") and the
Thomson Vendors received 12,500,000 common shares and 4,000,000
preferred shares in exchange for his Brightpath Securities on
closing of the Transaction. Accordingly, Mr. Thomson is a
"related party" pursuant to MI 61-101.
A "related party transaction" under MI 61-101 includes, among
others, transactions where an issuer: (i) purchases or acquires an
asset from a Related Party for valuable consideration; or (ii)
issues a security to a Related Party. Pursuant to the Transaction,
the Company acquired Brightpath Securities in consideration for the
issuance of common shares and preferred shares to the Thomson
Vendors, thereby making the Transaction a "related party
transaction" under MI 61-101. MI 61-101 permits issuers to complete
related party transactions provided that certain disclosure is made
regarding the Transaction and the Related Party, including
disclosure included in this news release and the information
circular for the shareholder meeting approving the related party
transaction. In addition, unless an exemption is available, issuers
contemplating a related party transaction must obtain (1) a formal
valuation with respect to the transaction, and (2) minority
shareholder approval for the transaction ("Majority of Minority
Shareholder Approval").
With respect to the Transaction and the formal valuation
requirement, the Company relied on the exemption available to it
pursuant to section 5.5(b) of MI 61-101. The Company obtained
Majority of Minority Shareholder Approval prior to closing the
Transaction at its annual and special meeting of shareholders held
on June 7, 2022. An aggregate of
5,000,000 common shares and 3,500,000 preferred shares owned or
controlled by Thomson were excluded from voting on the transaction
at the meeting. For more information regarding the Majority of
Minority Shareholder Approval, please refer to the management
information circular for the meeting available on the Company's
profile at www.sedar.com, as well as the Company's news releases
dated May 5, 2022, May 30, 2022 and June
7, 2022.
About Brightpath Capital
Brightpath specializes in arranging mortgages for people who are
self-employed, new to the country, experiencing credit issues, or
looking at renovation/flip projects. Our knowledge and experience,
efficient service, and common sense approach to lending are just a
few of the reasons to select Brightpath Capital for financing
needs. We also offer bridge financing for residential properties
with flexible terms. Private mortgages at very competitive terms.
Interest only payments. Fully open terms. For more information
please visit: www.brightpath.ca.
About Montfort Capital
Corp.
Montfort manages a diversified
family of specialized private credit brands that utilize focused
strategies and experienced management teams combined with advanced
technology to improve fee related performance. Montfort facilitates transparency for all of
its investors through public company reporting. For further
information, please visit www.montfortcapital.com.
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 news release.
Forward-Looking
Information
Certain information and statements in this news release
contain and constitute forward-looking information or
forward-looking statements as defined under applicable securities
laws (collectively, "forward-looking statements"). Forward-looking
statements normally contain words like 'believe', 'expect',
'anticipate', 'plan', 'intend', 'continue', 'estimate', 'may',
'will', 'should', 'ongoing' and similar expressions, and within
this news release include any statements (express or implied)
respecting the future performance of the combined companies, future
value creation for shareholders, the creation of value for
shareholders following completion of the Transaction, growth of the
Company's investment portfolio and expectations regarding making
further investments in the coming months. Forward-looking
statements are not guarantees of future performance, actions, or
developments and are based on expectations, assumptions and other
factors that management currently believes are relevant, reasonable
and appropriate in the circumstances, including, without
limitation, the following assumptions: that the Company and its
investee companies are able to meet their respective future
objectives and priorities, assumptions concerning general economic
growth and the absence of unforeseen changes in the legislative and
regulatory framework for the Company. Although management believes
that the forward-looking statements are reasonable, actual results
could be substantially different due to the risks and uncertainties
associated with and inherent to Montfort's business. Material risks and
uncertainties applicable to the forward-looking statements set out
herein include, but are not limited to, the Company having
insufficient financial resources to achieve its objectives;
availability of further investments that are appropriate for the
Company on terms that it finds acceptable or at all; successful
completion of exits from investments on terms that constitute a
gain when no such exits are currently anticipated; intense
competition in all aspects of business; reliance on limited
management resources; general economic risks; new laws and
regulations and risk of litigation. Although Montfort has attempted to identify factors
that may cause actual actions, events or results to differ
materially from those disclosed in the forward-looking statements,
there may be other factors that cause actions, events or results
not to be as anticipated, predicted, estimated or intended. Also,
many of the factors are beyond the control of Montfort. Accordingly, readers should not
place undue reliance on forward-looking statements. Montfort undertakes no obligation to reissue
or update any forward-looking statements as a result of new
information or events after the date hereof except as may be
required by law. All forward-looking statements contained in this
news release are qualified by this cautionary statement.
SOURCE Montfort Capital Corp.