Toronto-based specialty lending platform Callidus Capital Corp (TSX: CBL), a portfolio company of Canadian private equity firm Catalyst Capital Group, has announced a new securitization facility. Expected to be initiated at $165 million, the facility is intended to serve as the company’s main senior growth-financing vehicle. Newton Glassman, chairman and CEO of Callidus, and a Catalyst managing partner, said the facility diversifies the company’s funding and “will become an increasingly larger portion of our capital structure.” Callidus, which went public in April 2014, is majority owned by Catalyst.
Callidus Capital Announces New Securitization Facility
TORONTO, July 18, 2016 /CNW/ – Callidus Capital Corporation (TSX:CBL) (“Callidus” or the “Corporation”) is pleased to announce that it has received provisional investment grade ratings for loans to be issued through a new securitization facility. This facility is intended to serve as the Corporation’s primary senior growth-financing vehicle going forward. The provisional ratings will be used for marketing, which is expected to begin the week of July 25, and final ratings will be received when all documentation is complete and the securitization transaction is closed.
The facility, with four investment grade debt tranches ranging from AAA (sf) to BBB (sf), is expected to be initiated at $165 million and will augment Callidus’ existing facilities. The new securitization facility will increase in size as new loans are added. The four investment grade debt tranches ranging from AAA (sf) to BBB (sf), represent approximately two-thirds of the initial expected issue size.
“This additional financing diversifies our funding, and as our loan book grows, it will become an increasingly larger portion of our capital structure. It positions us well and in advance of growth to support a lower, sustainable cost of capital for our business,” said Newton Glassman, Chairman and CEO of Callidus. “With the foundation for future loan growth funding well established, we will continue to return significant capital to shareholders through the SIB and planned NCIB.”
Supports Incremental, Lower-Cost Liquidity and Re-starting Loan Growth
Upon closing, the new facility will create incremental liquidity for Callidus. It is estimated that the initial $165 million securitization will allow the Corporation to lever the current loan portfolio by an incremental $25 million. Callidus will re-start growth of its loan portfolio within the next quarter, with the intent of ultimately utilizing the facility as the primary source of funding for incremental growth. The Corporation remains committed to doubling the loan portfolio over the next two to three years.
Debt with ratings and maturity similar to the new securitization facility is currently trading in a range that would represent approximately a 2% reduction in Callidus’ cost of funds, compared with the rates Callidus is paying under the current financing facilities. Callidus expects securitization to represent a growing proportion of the capital structure as it funds the incremental growth in the loan portfolio and further reduces the Corporation’s cost of capital.
Enhances Financial Flexibility
A significant advantage of the new facility is the ability to access funding more rapidly than is currently possible. It is expected that in the future, when debt is funded through this facility, the funding timeline will be reduced significantly – from the current eight to 12 weeks, to approximately two to four weeks.
Incremental Facility that Will Grow in Significance
Proceeds from the new securitization facility will be used to partially repay outstanding amounts under the existing facilities, while those facilities are expected to largely remain in place. Over time, as the securitization program expands, Callidus will review and optimize the size of its other facilities to achieve the most suitable capital structure to support the doubling of its loan book.
This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company in any jurisdiction in which such offer, solicitation or sale would be unlawful.
About Callidus Capital Corporation
Established in 2003, Callidus Capital Corporation is a Canadian company that specializes in innovative and creative financing solutions for companies that are unable to obtain adequate financing from conventional lending institutions. Unlike conventional lending institutions who demand a long list of covenants and make credit decisions based on cash flow and projections, Callidus credit facilities have few, if any, covenants and are based on the value of a borrower’s assets, its enterprise value and borrowing needs. Callidus employs a proprietary system of monitoring collateral and exercising control over the cash inflow and outflows of each borrower, enabling Callidus to very effectively manage any risk of loss. Further information is available on our website, www.calliduscapital.ca.
Photo courtesy of Reuters/Mark Blinch