Specialty lending platform Callidus Capital Corp (TSX: CBL), which in April completed a $252 million initial public offering, has hired Steve Parker, an asset-based lender located in Seattle, to be its senior originator. Parker is the first U.S.-based employee of the firm, which is considering additional hires. In its Q1 2014 fiscal report, the Toronto-based Callidus also said it has gross loans receivable of $480 million, with a committed amount of $588 million. It also has a pipeline of potential new loans of about $420 million, of which it has signed back term sheets for $250 million. Callidus is majority-owned by Canadian private equity firm Catalyst Capital Group.
Callidus Capital Corporation Reports Fiscal 2014 First Quarter Results
TORONTO, May 14, 2014 /CNW/ – Callidus Capital Corporation (“Callidus” or the “Company”) (TSX: CBL), a provider of flexible and innovative asset-based loans, announced today an update on the current status of its business and provided its 2014 first quarter financial results, for the three-month period ended March 31, 20141.
We are very pleased to have successfully completed our IPO and to launch the next stage of growth for Callidus as a public company. The IPO provides us with growth capital and diversifies our funding sources with access to permanent capital while allowing us to continue to maintain an important strategic, operating and financing relationship with the Catalyst Group. We note that the quarter ended March 31, 2014 that is being reported today was completed prior to the closing of our IPO and contains financial information on a capital structure that was replaced on the IPO. However, we wanted to establish an active dialogue with our shareholders and our announcement today provides the basis for which we will provide reporting as a public company to our stakeholders. We continue to see exciting growth and opportunities in our core products and markets and are actively pursuing a number of growth initiatives.
We continue to progress on a number of growth initiatives including, but not limited to, discussions with certain candidates to enhance and complement geographic coverage in select Canadian and U.S. markets, one of which, Steve Parker, a seasoned ABL lender located in Seattle, Washington has accepted our offer to be our senior originator for the Pacific Northwest and will be our first employee in the US. We will continue to keep you appraised as we make progress on these and other initiatives.
Current state of the business, as at May 8, 2014:
Gross loans receivable of $480 million, with an aggregate committed amount of $588 million
Pipeline of potential new loans totaling approximately $420 million, for which we have signed back term sheets that we are pursuing of approximately $250 million, recognizing that not all these potential loans will close
Cash position of $159 million, following exercise of the overallotment option
Total debt of $194 million, or 40.4% of gross loans receivable
Pro forma net income of approximately $39 million on the 82% economic interest in the loan portfolio held by Callidus after giving effect to the changes to the capital structure implemented in connection with the Company’s initial public offering and the termination of the funding arrangements with the Company’s shareholders prior to the initial public offering2
From March 31, 2014 to May 8, 2014, three new loans totalling $55 million in commitments were extended and one $20 million loan was repaid. Additionally, $34 million in net funding was advanced to existing borrowers.
As at May 8, 2014, there were 22 loan commitments, the largest of which was a US$75 million commitment, and the smallest of which was a $3.5 million commitment. The average loan amount funded was $21 million.
Highlights from the first quarter:
Gross loans receivable increased 9.4% to $417 million as at March 31, 2014
Average gross loans receivable of $405 million for the quarter
Gross yield of 20.4%
Adjusted EBITDA margin of 79%
During the current quarter, two new loans totalling $32 million in commitments were extended and one $6 million loan was repaid by a borrower. Additionally, $23 million in net funding was advanced to existing borrowers.
There were 20 loan commitments as at March 31, 2014, the largest of which was a US$75 million commitment, and the smallest of which was a $3.5 million commitment. The average loan amount funded was $20 million.
1 Amounts expressed are before Derecognition, unless otherwise indicated. For further information about Derecognition as it relates to the Corporation’s initial public offering, please refer to the final prospectus filed with the various securities regulatory authorities through Canada on April 15, 2014 (“Final Prospectus”).
2 Calculated on a consistent basis as described in the Final Prospectus.
Please see data charts on SEDAR.
Summary of subsequent events:
On April 23, 2014, the Company completed an initial public offering (the “Offering”) of 18 million common shares (“Common Shares”) at a price of $14.00 per common share for aggregate gross proceeds of $252 million. The syndicate of underwriters were granted and exercised on May 8, 2014, an over-allotment option to purchase an additional 2,700,000 common shares from the Company at a price of $14.00 per share for aggregate gross proceeds of $37.8 million. In connection with the Offering:
The Company, The Catalyst Capital Group Inc. (“CCGI”), and funds managed by CCGI (the “Catalyst Funds”) entered into a participation agreement with respect to the Catalyst Funds’ approximately 18% undivided participation interest in the Loan Portfolio existing as of the closing date and any future participation interest that may be acquired by the Catalyst Funds thereunder. The participation agreement provides future Catalyst Funds a continuing ability to participate in the current loan portfolio and future growth in the loan portfolio. Additionally, the participation agreement provides the Company the option to acquire all or part of the Catalyst Funds’ participation interest in the loan portfolio that a Catalyst Fund seeks to sell for an amount equal to the aggregate funded amount of the interest in the loan portfolio being sold plus accrued interest and fees. The Catalyst Fund’s interest in the loan portfolio will be derecognized from Callidus’ balance sheet for the purposes of IFRS.
The Participating Debenture held by the Catalyst Funds was repaid by Callidus on closing of the IPO in accordance with the debenture repayment agreement.
Following the exercise of the overallotment option, the ownership by the Catalyst Group was 57.5% based on the shares outstanding.
With respect to loans included in the Company’s portfolio at the time of the Offering, the Company and the Catalyst Funds have agreed that in the event: (i) realization proceedings have been initiated with respect to the loan(s) at the time of sale, or before the approved renewal of the loan at the next scheduled credit review for the loan (generally one year after the initial advance or the last extension) and (ii) the Company realizes a loss on a loan, determined as the difference between amounts advanced and amounts recovered, the applicable Catalyst Fund(s) have agreed to make a payment to the Company in an amount equal to the realized loss. The Catalyst Funds will not be required to make any payments related to losses on interest income.
With respect to any purchase by the Company of a participation interest from a Catalyst Fund, the selling Catalyst Fund will agree that, in the event that: (i) realization proceedings have been initiated with respect to any loan in the loan portfolio at the time of sale, or before the approved renewal of the loan at the next scheduled credit review for the loan (generally one year after the initial advance or the last extension) and (ii) the Company realizes a loss on a loan, determined as the difference between amounts advanced and amounts recovered, the applicable Catalyst Fund(s) will make a payment to the Company in an amount equal to the realized loss. The Catalyst Funds will not be required to make any payments related to losses on interest income.
Callidus entered into a new loan financing and servicing agreement with Deutsche Bank AG, New York branch, which provides for up to US$200 million revolving credit facility. The revolving period is for an initial period of two years (and may be extended upon mutual agreement of parties) and the amortization period will be for a period of two years following the last day of the revolving period.
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.
Certain statements made herein contain forward-looking information. 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
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