Note: All amounts in Canadian dollars unless otherwise
indicated.
Substantial Issuer Bid
- The Board of Directors has approved a substantial issuer bid of
up to $50 million at a price of
$14 per common share (the "SIB"),
which could result in the repurchase and cancellation of up to
3,571,428 common shares if the maximum number of shares is
tendered
- In connection with the issuer bid, the Board of Directors
retained National Bank Financial Inc. to prepare a formal valuation
of the common shares (the "Valuation"). The Board of Directors
expects that the fair market value of the common shares to be
provided for in the valuation will be substantially and materially
higher than the $14 per common share
offered under the SIB
- The Board expects that the Valuation will be filed and that the
offering documents will be mailed to shareholders by April 22, 2016.
Full Year 2015 Highlights
- Total revenue of $171 million for
the year, an increase of $72 million
or 73% from last year
- Net income was $62.0 million for
the year, up $20.2 million or 48%
from last year
- Earnings per share (diluted) of $1.22 for the year, an increase of $0.19 or 18% from last year
- ROE was 12.9%, an increase of 230 bps or 22%, from 10.6% last
year
- Gross yield for the year was 18.9%, a decrease from 20.3% last
year due primarily to a higher proportion of Callidus Lite
loans
- Gross loans receivable before derecognition was $1,221 million at year-end, up $390 million or 47% from last year
- Average loan portfolio outstanding was $1,022 million, an increase of $476 million or 87% from last year
- Leverage ratio of 50.9% at the end of the current year, an
increase from 38.1% at the end of last year
- During the year, four loans representing $58 million were fully repaid
- Callidus recorded a disappointing and unexpected pre-tax
provision of $22.7 million in the
fourth quarter of 2015, as a result of an isolated atypical event
experienced by one borrower, Gray Aqua Group Ltd. which impacted
net income, EPS and ROE. Before this unusual provision, results for
2015 were net income of $78.6
million, an increase of 88% over 2014; EPS (diluted) of
$1.54, an increase of 50%; and ROE of
16.2%, an improvement from 10.6% from 2014. These kinds of events
do occur occasionally as a result of the nature of the business, as
do unexpected one-time gains
- Increased the amount of the revolving credit facility by
US$100 million to US$300 million
- Increased the amount of the revolving unsecured subordinated
bridge facility from the Catalyst Funds by US$50 million to US$250 million
- Adopted a dividend policy initially set at $0.70 per common share per annum and implemented
a dividend reinvestment plan ("DRIP"). Commencing with the
month of April, 2016, the Board modified the dividend payment
frequency to monthly instead of quarterly
- Successfully completed a normal course issuer bid by acquiring
and cancelling approximately 2.6 million shares
TORONTO, March 30, 2016 /CNW/ - Callidus Capital
Corporation ("Callidus" or the "Company") (TSX:CBL),
today announced a Substantial Issuer Bid, released its full year
2015 and fourth quarter financial results and provided an update on
the current state of its business. Callidus, which
provides flexible and innovative asset-based loans, primarily to
growth and distressed or troubled companies, reported significant
gains in its key metrics, including earnings, revenues and loan
portfolio growth for the year-ended December 31, 2015.
'Another Good Year'
Newton
Glassman, Executive Chairman and Chief Executive Officer of
Callidus said: "2015 was another good year for Callidus
Capital. While we had a disappointing and unexpected event in
the fourth quarter related to a loan to a company, Gray Aqua
Group Ltd., virtually every measure in our results for the year
overall showed significant improvement over 2014, underscoring
management's primary commitment -- operating our business
effectively over multiple quarters. Quarter over quarter
results were also very good, but for this unusual event. The
momentum we achieved in loan portfolio growth, revenues, earnings
and return on equity, along with an extremely robust new loan
pipeline, despite the intentional slowdown in growth of the loan
book in the fourth quarter, provides the foundation for a continued
strong future. Most importantly, we now see that existing
loan quality and go-forward yields are way up as a result of some
operational improvements discussed in our MD&A."
"While the nature of our business means our quarterly results
can be 'lumpy', Callidus continues to demonstrate solid and
continuously improving performance over the longer term. Our
growth and growing pipeline are evidence of the market opportunity,
the soundness of our business model coupled with the operational
improvements we implemented, overall continued excellent credit
quality, and our unique competitive advantage, at a time when
broader economic factors favour a business like Callidus," added
David Reese, President and Chief
Operating Officer of Callidus.
Maximizing Shareholder Value and Substantial Issuer
Bid
Callidus has now completed a number of steps aimed at
maximizing shareholder value. In 2015, a Normal Course Issuer
Bid was completed and a regular quarterly dividend policy, which
the Board has determined to declare and pay monthly commencing in
April, was implemented. The magnitude of our dividend
reflects faster than expected growth. Mr. Glassman stated,
"We have the current liquidity and are generating more than
sufficient liquidity to support all of continued loan portfolio
growth, a growing dividend over time, as well as the proposed
SIB."
As part of the continuing effort to better align the share price
with the underlying value of the shares, Callidus' Board of
Directors (the "Board") has authorized a substantial issuer bid to
purchase for cancellation up to 3,571,428 common shares at a
purchase price of $14 per common
share (the "Purchase Price") for an aggregate purchase price not to
exceed $50 million (the "Offer").
In connection with the Offer, the Board has retained National
Bank Financial Inc. to prepare a formal valuation of the common
shares (the "Valuation"). The Board also expects that the
fair market value of the common shares to be provided for in the
Valuation will be substantially and materially higher than the
$14 per common share offered under
the Offer.
The Offer will not be conditional upon any minimum number of
shares being tendered, but will be subject to certain other
customary conditions. A complete description of the terms and
conditions of the Offer will be contained in the Offer to Purchase
and Issuer Bid Circular and related documents that Callidus expects
will be filed with the applicable securities regulatory authorities
in Canada and expected to be
mailed to shareholders on or before April
22, 2016. National Bank Financial Inc. is
expected to deliver to the Board of Directors an opinion that (i) a
liquid market exists for the shares as of the opinion and (ii) it
is reasonable to conclude that, following the completion of the
Offer, there will be a market for holders of the shares who do not
tender to the Offer that is not materially less liquid than the
market that existed at the time of the making of the
Offer.
National Bank Financial Inc. is independent of the Company for
the purposes of applicable securities laws. A copy of the
Valuation will be in the Circular but also available at the
Company's profile at www.sedar.com prior to the Issuer Bid Circular
being mailed to shareholders.
The Board of Directors strongly recommends that shareholders
review the Valuation and the Offer to Purchase and Issuer Bid
Circular in their entirety before determining whether to
participate in the Offer.
The Purchase Price was determined based on a number of factors
including a substantial discount to the expected Valuation, but a
material premium to the current and historic trading price of the
common shares, and the price at which the common shares were sold
under the Company's initial public offering. The Purchase
Price represents a premium of 36% over the closing price of the
common shares on the Toronto Stock Exchange (the "TSX") on
March 29, 2016, the last trading day
before the announcement of the Offer, and a premium of 53% over the
20 day volume weighted average trading price of the common shares
on the TSX for the period ending on March
29, 2016.
The Catalyst Capital Group Inc. ("Catalyst"), the manager of
various funds who own in the aggregate 62.4% of Callidus' common
shares, has advised Callidus that the funds will not tender any of
their holdings to the Offer.
Mr. Glassman said "We continue to believe strongly that Callidus
is a fantastic business with an incredible future. We will
continue to work with shareholders to address their concerns and to
communicate effectively with the market. It is our intention to do
everything we can to ensure maximum value for shareholders.
The SIB is intended to provide liquidity to those shareholders
desirous of such."
In addition, Callidus advises that if, following completion of
the Offer, our shares continue to trade at a significant discount
to their value, it may seek to privatize the company. In
order to avoid any perception of conflict, Catalyst has told the
Board that it and all Funds managed by it will currently abstain
from bidding for the roughly 32% of Callidus not owned by them so
as to ensure that if a going private transaction is ever
entertained, it will be pursuant to a process structured to ensure
value maximization for all shareholders, but especially minority
shareholders, as Catalyst has no intention of ever selling its
interest in Callidus. Four interested parties have already
approached Callidus.
Credit Quality Improved, Yields Enhanced as a Result of
Process Improvements
During the first quarter of 2016,
Callidus implemented an intentional and substantial slowdown in new
loan underwriting while it undertook an internal review of
operating and underwriting procedures with a view to achieving
improved processes and enhanced margins. With ample liquidity
to meet both our short and longer-term requirements, a number of
process changes and improvements to those procedures have been
implemented that are expected to be reflected in future
results. Specific details regarding these improvements can be
found in Management's Discussion and Analysis as at December 31, 2015.
Mr. Glassman said "There are two longer-term and positive
impacts of these changes. Firstly, we believe as a result of:
(a) the number of recent repayments as well as soon to be completed
repayments, (b) the current and expected decline in the number and
value of watch-list loans, and (c) the Project Resolve loan, that
the credit quality of Callidus' portfolio is much higher currently
than at any time in the past. Secondly, yield potential has
been dramatically increased by certain operational changes,
including our decision to consider free warrants and limited equity
participations at low, or no cost in certain historic and
go-forward situations. Starting with our Q2 material, we intend to
disclose: (i) the nature of such arrangements, (ii) fair value of
the financial instruments received pursuant to such, where
appropriate, and (iii) the impact to total returns, over and above,
the gross yield generated from the associated loans."
Current state of the business, as at March 29, 2016:
- Gross loans receivable before derecognition stood at
$1,143 million, primarily as a result
of the sale of our "asset held for sale"
- The pipeline of potential new loans stands at approximately
$720 million
- Signed back term sheets and balance of funding for Project
Resolve Inc. as described below, of approximately $230 million
- One of the Company's newest and largest loans is for Project
Resolve Inc. – which involves the conversion of a modern
containership, the MV Asterix, into a much needed Auxiliary Oil
Replenishment vessel for the Royal Canadian Navy. The vessel is
being converted in Canada's
largest shipyard - Chantier Davie Canada Inc. shipyard in
Levis, Quebec. Callidus extended a
project finance loan that at close was supported first by the
collateral of the ship, and second, upon completion a Government of
Canada take-out lease with
expected positive margin
- Total debt (net of cash and cash equivalents) of $458 million, or 40% of gross loans receivable
before derecognition
- During the first quarter of 2016, two loans representing
$16 million in commitments were fully
repaid. In the coming months, the Company expects five other loan
repayments, representing approximately $190
million in current gross loans receivable
- In March 2016, the Company
required payment by the Catalyst Funds of a guarantee with respect
to one of the Company's loan assets (Xchange Technology Group) in
an amount equal to the total outstanding principal plus accrued and
unpaid interest of $101.3 million.
The Catalyst Funds acquired the loan in question for an amount
equal to the guarantee and are now the owners of the business and
are actively restructuring it. The Company primarily used the
proceeds from the guarantee to repay a portion of the balance
outstanding under the subordinated bridge facility
- Three watch-list accounts (with gross loans receivables of
$104 million as of December 31, 2015) have left the watch-list and
none have been added since December 31,
2015. The Company expects other watch-list accounts (with
gross loans receivable of $92 million
as of March 29, 2016, to be favorably
resolved in the coming months, which would result in our watch-list
decreasing to 23% of gross loans receivable
Financial Highlights
|
|
|
|
Three Months
Ended
|
Year Ended
|
($ 000s)
|
December 31,
2015
|
September 30,
2015
|
December 31,
2014
|
December 31,
2015
|
December 31,
2014
|
Average loan
portfolio outstanding (1)
|
$1,192,994
|
$1,101,675
|
$718,562
|
$1,021,553
|
$ 545,749
|
Total revenue (after
derecognition)
|
48,467
|
48,419
|
29,194
|
171,306
|
99,046
|
Gross yield
(1)
|
19.1%
|
19.7%
|
18.6%
|
18.9%
|
20.3%
|
Net interest margin
(1)
|
12.2%
|
13.6%
|
13.8%
|
13.0%
|
12.9%
|
Net income
|
7,648
|
19,925
|
21,019
|
61,952
|
41,759
|
Earnings per share
(diluted)
|
$0.15
|
$0.40
|
$0.42
|
$1.22
|
$1.03
|
ROE
|
6.2%
|
16.1%
|
19.5%
|
12.9%
|
10.6%
|
Leverage ratio
(1)
|
50.9%
|
52.8%
|
38.1%
|
50.9%
|
38.1%
|
Notes:
|
(1)
|
Refer to "Description
of Non-IFRS Measures" in the MD&A. These financial measures are
not recognized measures
under IFRS and do not have a standardized meaning prescribed by
IFRS. Therefore, they may not be comparable to
similar measures used by other issuers.
|
Fourth Quarter 2015 Highlights
- Gross loans receivable before derecognition of $1,221 million at December
31, 2015, up $22 million or 2%
from the prior quarter
- Average loan portfolio outstanding was $1,193 million, an increase of $91 million or 8% from the prior quarter, and an
increase of $474 million or 66% from
the same quarter last year
- Total revenue of $48 million for
the quarter, consistent with the previous quarter, and an increase
from $29 million in the same quarter
last year
- Gross yield for the quarter was 19.1%, a decrease from 19.7% in
the prior quarter, and an increase from 18.6% in the same quarter
last year. The prior quarter gross yield included the recognition
of a non-recurring fee and an early prepayment fee totaling
$1.6 million. The increase from the
same quarter last year was due primarily to higher rates charged on
certain loans this quarter. As noted previously, gross yields can
be lumpy quarter to quarter
- Net income was $7.6 million for
the quarter. Earnings for the current quarter were impacted by an
unusual pre-tax provision of $22.7
million related to the expected loss on Gray Aqua as a
result of an isolated event experienced by it. Before this specific
provision, net income was $24.3
million for the quarter, which is $4.4 million higher than the prior quarter
- Earnings per share (diluted) of $0.15 for the quarter, a decrease from
$0.40 last quarter, and a decrease
from $0.42 in the same quarter last
year. Before the specific provision above, earnings per share
(diluted) was $0.48 for the quarter,
which is $0.08 per share higher
quarter over quarter
- ROE was 6.2%, a decrease from 16.1% in the prior quarter, and a
decrease from 19.5% in the same quarter last year. Before the
specific provision above, ROE was 19.2% for the quarter, an
increase from 16.1% in the prior quarter
- Leverage ratio of 50.9% at the end of the current quarter, a
decrease from 52.8% at the end of the prior quarter
- As at December 31, 2015, the
estimated global collateral value coverage across aggregate net
loans receivable was approximately 172% with a range between 100%
and 525% on an individual loan basis. Furthermore, the loans on
Callidus' watch-list had an estimated aggregate collateral value
coverage of 104% and non-watchlist loans had an estimated
collateral value coverage of 209%. Given changes to the watch-list
post quarter and further expected reductions in watch-list amounts,
it is expected that watch-list collateral coverage will continue to
go up. It should be noted that there is no cross-collateralization
of the asset coverage as between borrowers
- Provision for loan losses for the fourth quarter was
$25.4 million, of which a
$6.0 million recovery was recognized
related to the guarantee provided by the Catalyst funds
No Solicitation
This press release is for
informational purposes only and does not constitute an offer to buy
or the solicitation of an offer to sell Callidus' common shares.
The solicitation and the offer to buy Callidus' common shares will
be made only pursuant to the Offer to Purchase and Issuer Bid
Circular and related documents. At the time the Offer is commenced,
Callidus will file the Offer to Purchase and Issuer Bid Circular
and related documents with the Canadian securities regulatory
authorities. Shareholders should carefully read the Offer to
Purchase and Issuer Bid Circular, the related letter of transmittal
and other related documents when they are available because they
will contain important information, including the various terms and
conditions of the Offer. The Offer to Purchase and Issuer Bid
Circular, the related letter of transmittal and certain other
documents will be delivered without charge to all shareholders.
Offer documents required to be filed in Canada will be available without charge at
www.sedar.com. Shareholders are urged to read these materials
carefully prior to making any decision with respect to the
Offer.
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 inflows and outflows of each
borrower, enabling Callidus to very effectively manage risk of
loss.
Forward-Looking Statements
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.
Conference call
Callidus will host a conference call
to discuss Q4 2015 results on March 31, 2016 at 10:30
a.m. Eastern Time. The dial in number for the call is (647)
427-7450 or (888) 231-8191 (reference number: 93956138). A
taped replay of the call will be available until April 7, 2016 at (416) 849-0833 or (855) 859-2056
(reference number: 93956138).
SOURCE Callidus Capital Corporation