TORONTO, Aug. 9, 2024
/CNW/ - Chesswood Group Limited ("Chesswood" or the
"Company") (TSX: CHW) announces that it has sold all of its
interests in Vault Credit Corporation and Vault Home Credit
Corporation (collectively, "Vault"), representing the
entirety of Chesswood's Canadian equipment leasing and consumer
financing business segment, to an affiliate of HB Leaseco Holdings
Inc. (the "Vault Purchaser") pursuant to the terms of a
Share Purchase Agreement dated today (the "Purchase
Agreement"), and provides an update on its previously announced
evaluation of the strategic direction of Chesswood being supervised
by a special committee (the "Committee") of the board of
directors of Chesswood (the "Board of Directors").
Summary of Transaction
Pursuant to the terms of the Purchase Agreement, the Vault
Purchaser has acquired the Company's 51% majority interest in Vault
for an amount equal to C$60,000,000,
the proceeds of which have been used to reduce the Company's
outstanding indebtedness (the "Transaction").
The completion of the Transaction marks a first step towards the
Company's execution of its previously announced Credit Facility
action plan to remedy its existing non-compliance with the
borrowing base covenants under the Credit Facility, as required
under the extended waiver provided by the lending syndicate under
the Credit Facility (the "Waiver"). As previously announced,
the Waiver required the Company to, among other things, complete
the sale of its interests in Vault during the waiver period
expiring on September 16, 2024.
The Committee and the Board of Directors considered, and
continues to consider, a variety of financial restructuring options
available to the Company and, following their respective review of
the terms of the Transaction, unanimously determined that the
Transaction was the only reasonable and current option available to
the Company capable of satisfying the applicable condition under
the Waiver, while materially reducing the Company's indebtedness
under the Credit Facility and allowing future borrowings under the
Credit Facility to fund continued operations. The Committee
retained RBC Capital Markets as financial advisor and the Company
engaged Alvarez & Marsal to provide certain financial and
restructuring advisory services.
Strategic Review Update
Following completion of the Transaction, the Committee will
continue to review various restructuring alternatives including the
potential sale of other key operating subsidiaries or assets to
maximize the value of the Company's remaining asset portfolio in
the best interests of the Company and its stakeholders. Although
the Company continues to be subject to significant capital
constraints, it remains focused on the execution of its Credit
Facility action plan through the support of and co-operative
engagement from its lending syndicate and the satisfaction of
Chesswood's obligations under the Waiver.
There can be no assurance that any required further extension to
the Waiver will be obtained, or that (although the Company has
continued to engage in co-operative and promising discussions in
respect of the other required sale transactions) the sales of
portfolio receivables or the sales of interests in, or assets of,
Pawnee Leasing, as contemplated in the Waiver, will be completed
during the current waiver period, or ever. As such, no undue
reliance should be placed on any expectations of completion of any
such transactions or any other elements of the Company's action
plan including, without limitation, the occurrence of any
restructuring alternatives being evaluated by the Committee in
connection with its strategic review process.
Securities Law Matters
As the Vault Purchaser is a "related party" of the Company by
virtue of holding, together with its joint actors, 3,334,792 common
shares of the Company, representing approximately 17.7% of the
issued and outstanding shares of the Company as of the date of this
press release, the Transaction is considered a "related party
transaction" under Multilateral Instrument 61-101 – Protection
of Minority Security Holders in Special Transactions ("MI
61-101"). As such, the Transaction would ordinarily be subject
to valuation and minority approval requirements under MI 61-101.
However, the Company relied on the "financial hardship" exemptions
in sections 5.5(g) and 5.7(e) of MI 61-101 from the valuation and
minority approval requirements, respectively.
The Committee and the Board of Directors, acting in good faith,
determined that (a) the Company was in serious financial
difficulty, as absent the closing of the Transaction, the Company
would be unable to satisfy the requirements set forth in the Waiver
and ultimately remedy its breach under the Credit Facility, (b) the
Transaction was designed to, and has, improved the financial
condition of the Company, as all cash proceeds were used to repay a
portion of the indebtedness under the Credit Facility in
furtherance of the Credit Facility action plan, and (c) the terms
of the Transaction were reasonable in the circumstances of the
Company as it represents the only practical option available to the
Company under the current circumstances after having given due
consideration to the outcome of the Company's previously announced
ongoing review of strategic alternatives, that included Vault, as
well as other subsidiaries of the Company, having been widely
marketed by the Company in a process conducted prior to the Company
becoming aware of its breach under the Credit Facility, and which
has neither been successful in providing other viable alternatives
for the Company and its shareholders nor resulted in any other
offers for Vault to date.
A material change report will be filed as soon as practicable
under the Company's SEDAR+ profile in connection with the
Transaction. The Company did not file a material change report at
least 21 days prior to closing of the Transaction as required under
section 5.2(2) of MI 61-101 as the Company desired to complete the
Transaction at the earliest possible opportunity in light of the
Company's financial condition, including its need to meet the
requirements under the Waiver prior to the expiry of the waiver
period. The Company determined that the shorter period was
reasonable and necessary in the circumstances.
ABOUT CHESSWOOD GROUP LIMITED
Chesswood Group Limited is a Toronto,
Canada based holding company whose subsidiaries engage in
the business of specialty finance (including equipment finance
throughout North America and
vehicle finance and legal sector finance in Canada), as well as the origination and
management of private credit alternatives for North American
investors. Our shares trade on the Toronto Stock Exchange (under
the symbol CHW).
For information on Chesswood Group
Limited and its operating subsidiaries:
www.ChesswoodGroup.com
www.PawneeLeasing.com
www.TandemFinance.com
www.Rifco.net
www.WaypointInvestmentPartners.com
www.EasyLegal.ca
FORWARD-LOOKING INFORMATION
This press release contains forward-looking statements within
the meaning of applicable securities laws. Forward-looking
statements in this press release may include, but are not limited
to, statements relating to the Committee's strategic review process
including the ongoing pursuit of selling one or more of the
Company's business units, the Company itself or its remaining asset
portfolio, in whole or in part, or any resulting winddown and
evaluation of value enhancement opportunities, the Company's
pursuit of arrangements and execution of its Credit Facility action
plan to remedy, or in furtherance of an extension to the temporary
waiver of, the Company's breach under the Credit Facility, if any,
and other statements that are not material facts. Forward-looking
statements are typically identified by words such as "believe",
"expect", "anticipate", "project", "intend", "plan", "will", "may",
"estimate" and other similar expressions or the negative of these
words or variations of them or similar expressions.
Although the Company believes that the forward-looking
statements in this press release are based on information and
assumptions that are current, reasonable and complete, these
statements are by their nature subject to a number of factors,
risks and uncertainties, both general and specific in nature, that
could cause actual results to differ materially form those
expressed or implied by these forward-looking statements,
including, without limitation, the possibility that a further
extension to the waiver in relation to the Credit Facility covenant
breach may not be obtained, the availability, timing or completion
of any other transaction in furtherance of the Company's action
plan including, without limitation, any other capital raise or sale
transaction for all or a part of the Company's business. The
Company cautions that the foregoing assumptions and factors are not
exhaustive and other factors could also adversely affect its
results. For more information on the risks, uncertainties and
assumptions that could cause the Company's actual results to differ
from current expectations, please refer to the Company's publicly
filed documents, including the Company's annual information form
and management's discussion and analysis of financial condition and
performance, which are available electronically at
www.sedarplus.ca.
Unless otherwise noted or the context otherwise indicates, the
forward-looking statements contained in this press release describe
the Company's expectations as at the date of this press release
and, accordingly are subject to change after such date. Except as
may be required by applicable securities laws, the Company does not
undertake any obligation to update or revise any forward-looking
statements contained in this press release, whether as a result of
new information, future events or otherwise. Readers are cautioned
not to place undue reliance on these forward-looking
statements.
NO STOCK EXCHANGE, SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY HAS APPROVED OR DISAPPROVED THE INFORMATION CONTAINED
HEREIN.
SOURCE Chesswood Group Limited