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TORONTO, July 14, 2021 /CNW/ - Further to its press
releases of June 14 and July 9, 2021, Cliffside Capital Ltd.
("Cliffside" 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 raise $4.5 million in gross proceeds (herein, the
"Offering") and the formation of its new special purpose
private partnership, C.AR. LP I ("CAR LP"). Each Unit is
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 is exercisable for a three-year
period at a price $0.20 per Common
Share. Of the proceeds raised under the Offering, Cliffside has
used $3.75 million to fund CAR LP, of
which Cliffside will hold a 60% equity interest, with the remaining
proceeds to be used for general working capital purposes.
Purchase of NPCALRs
Cliffside also announces that it has caused CAR LP to acquire
the inaugural $29 million tranche of
non-prime consumer auto loan receivables ("NPCALR") from ACC
LP (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) pursuant to
the terms of the previously announced purchase agreement (the
"Purchase Agreement") entered into among CAR LP, the
Vendor 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 NPCALRs from time to
time from the Vendor, over a period of next twelve months, under
the term of the Purchase Agreement.
CAR LP has financed, and will continue 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") 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 raised directly in CAR LP in
the amount of $2.50 million (of which
CCMI invested $1.25 million).
As a result of the foregoing, Cliffside owns 60% of CAR LP,
CCMI owns 20% of CAR LP and external investors own 20% of CAR
LP.
In connection with the entering into of the Loan Agreement, CAR
LP paid Harrison Equity Partners ("HEP"), a non-arm's length
party of Cliffside, a structuring fee (the "Structuring
Fee") of $968,000 (plus
HST). Such Structuring Fee was 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. 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.
Statement of Cliffside CEO
"Today's transaction marks a further important step in the
evolution of Cliffside's business" commented CEO Steve Malone. "We are fortunate to enjoy the
continued support of various Canadian lenders. This transaction
adds two new lenders to our business and demonstrates our ability
to continue to reduce our cost of capital based on the strong
performance of our partnerships and our high credit standards. As
we increase our access to well-priced capital and grow our funding
sources and capital base, we will continue to grow and expand our
business. This current raise improves our profit margins while
enabling us to continue to remain disciplined and attract the right
borrower mix. We look forward to delivering 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 disclosed, the transactions contemplated by the
Purchase Agreement are taking place with non-arm's length parties
under the Policies of the TSXV as a consequence of each of CCMI,
ACC LP and LCAM being 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 Company subscribed for $2.0 million of Units under the Offering, of
which an aggregate of $1.675 million
was 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").
Regulatory Matters
The Corporation has relied 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 Company has relied 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.
As required by the policies of the TSXV, the Company sought and
obtained disinterested shareholder approval for the Transactions by
way of written consent. The Company has also obtained the
conditional approval of the TSXV to the Transactions and the
Offering. The securities issued under the Offering are subject to a
statutory hold period of four months and one day from the date of
issue.
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.