Catalyst Fund LP V, the fifth distressed-for-control fund of Canadian private equity firm Catalyst Capital Group, may participate in the funding of new loans originated by Callidus Capital Corp (TSX: CBL), a Toronto-based specialty business lending platform. The participation is in accordance with the terms of an agreement entered into in connection with Callidus’ initial public offering in 2014. Catalyst Capital, which recently raised an initial US$650 million in commitments for Fund V, remained the company’s majority shareholder following the public offering.
Callidus Capital Corporation Receives Clarity on Catalyst Funds II, III and IV Timelines, Provides Update on Catalyst Fund V Participation and Applies for Normal Course Issuer Bid
•Catalyst Fund II term being extended to at least June 2016
•Catalyst Fund III and IV terms confirmed for December 2019 and June 2022 respectively
•Catalyst Fund V first close of US $650 million of targeted US $1.25 billion
•Proposed normal course issuer bid for purchase of up to 2,561,396 of its common shares
TORONTO, April 27, 2015 /CNW/ – Callidus Capital Corporation (TSX: CBL) (“Callidus” or the “Corporation”) has been advised by The Catalyst Capital Group Inc., the manager of the Catalyst Funds, in light of the substantial portfolio of assets that will continue to be held by Fund II, that its current term is being extended to at least June 30, 2016 and that further extensions may be required in order to effect an orderly disposal of Fund II assets. As well, Callidus has been advised that, subject to further rights of extension, the term of Catalyst Fund III will expire in December 2019 and the term of Catalyst Fund IV will expire in June 2022.
Callidus had previously disclosed that the original term of Catalyst Fund II (together with a parallel fund), had been extended to April 2015 and that further extensions might be granted. Fund II is the holder of 1,849,057 Callidus common shares plus other shares representing a carried interest entitlement of The Catalyst Capital Group Inc. and its affiliates and associates that are subject to an escrow arrangement as disclosed at the time of the IPO and held for the long term benefit of The Catalyst Capital Group Inc. and its affiliates and associates.
Callidus had also previously disclosed that Catalyst Fund III is the holder of 18,277,595 common shares, and Catalyst Fund IV, the holder of 7,989,900 common shares.
Fund V Participation
The Catalyst Capital Group Inc. (“Catalyst”) recently announced the first closing of its most recent fund, Catalyst Fund Limited Partnership V (“Catalyst Fund V”), with US $650 million of capital commitments. Catalyst Fund V is targeting aggregate commitments of US $1.25 billion with a hard cap of US$1.5 billion.
In accordance with the terms of the participation agreement entered into in connection with Callidus’ initial public offering (the “Participation Agreement”), Catalyst Fund V is now entitled to participate in the funding of new loans originated by Callidus, thereby providing the Corporation with access to additional funds to finance the expansion of its loan portfolio at cost. Pursuant to the terms of the Participation Agreement, in the event that the Corporation determines that additional funding is required to finance expansion in the loan portfolio, Catalyst Fund V will be entitled to fund a portion of the expansion in accordance with a formula set out in the Participation Agreement which is based on the available capital of each of Callidus and Catalyst Fund V. By funding a portion of the growth, Catalyst Fund V will acquire a participation interest in the new loan portfolio and will assume all of the risks and rewards associated with that participation interest. The portion of the new loan portfolio owned by Fund V will be derecognized from Callidus’ balance sheet for the purposes of IFRS to the extent of Catalyst Fund V’s interest therein.
Callidus will also have the right to acquire Catalyst Fund V’s interest in the loan portfolio for an amount equal to the funded amount thereof plus accrued and unpaid interest when Catalyst Fund V determines to dispose of that interest. As part of that sale, Catalyst Fund V will also provide a principal guarantee of its percentage ownership interest in the relevant loans at the time of sale to Callidus.
Additionally, the resulting increase in Catalyst Fund V’s participation interest will result in the principal guarantee to be provided by Catalyst Fund V in the event Callidus repurchases the participation interest covering a larger proportion of the loan portfolios, thereby reducing Callidus’ risk with respect to those loans after such transfer.
The Corporation expects that its ability to access funds from Catalyst Fund V, together with its other existing sources of liquidity, will enable Callidus to fund the continued growth of its loan portfolio which remains robust.
Normal Course Issuer Bid
Callidus also announced today that it will be submitting a notice of intention to undertake a normal course issuer bid to the Toronto Stock Exchange (“TSX”) in connection with the purchase by Callidus of up to 2,561,396 of its common shares, representing 5% of the 51,227,920 common shares comprising Callidus’ total issued and outstanding common shares as of April 23, 2015. All common shares purchased by Callidus will be purchased on the open market through the facilities of the TSX in accordance with the rules, regulations and policies of the TSX and will be cancelled. Callidus has not made any purchases of its common shares in the preceding 12-month period. The normal course issuer bid will be open for a maximum period of 12 months.
The normal course issuer bid remains subject to the approval of the TSX. A further press release with additional details of the normal course issuer bid will be issued upon approval of the bid by the TSX.
Callidus determined to undertake the normal course issuer bid after receiving advice of its financial advisors as, in the opinion of management, its common shares have recently traded in a price range that does not reflect the underlying value of the Corporation. Callidus believes that any purchases under the normal course issuer bid will benefit all persons who continue to hold common shares by increasing their equity interest in the Corporation.
The company believes that when combined with existing sources of capital, including the cash generated by the current and growing portfolio of loans and the now available capital from Fund V, the issuer bid will not affect the company’s ability to fund expected growth.
Funds used by Callidus to effect purchases under the normal course issuer bid will reduce Callidus’ available capital and thereby reduce its proportionate interest in the new loan portfolio. However, Callidus does not view such adjustment as material.
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 the company’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.
This press release contains forward-looking statements that involve a number of risks and uncertainties, including in respect of the market price of the common shares and the benefit of the normal course issuer bid to existing shareholders. Although Callidus believes these statements to be reasonable, the assumptions upon which they are based may prove to be incorrect. Furthermore, the forward-looking statements contained in this press release are made as at the date of this press release and Callidus does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
SOURCE Callidus Capital Corporation
For further information: David Reese, President and Chief Operating Officer, (416) 945-3016, firstname.lastname@example.org; Jean Lépine, Director, Investor Relations, (416) 945-3023, email@example.com; www.calliduscapital.ca
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