TORONTO, Feb. 17, 2015 /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.
Portfolio Growth
We are pleased to report that as at
January 31, 2015, our gross loan
commitments totaled $1.1 billion, of
which a total of $893 million had
been advanced and was outstanding. This represents an
increase of $70 million in loan
advances from our last announcement on December 23, 2014, and an increase of
$512 million from December 31, 2013.
As at February 11, 2015, the
amount outstanding was $878 million,
a net increase of $55 million since
December 23, 2013 and a net decrease
of $15 million from January 31, 2015. The net decrease is
attributable to (i) a $16 million
partial repayment of a loan to a borrower (29% of the outstanding
loans to that borrower) that was under protection under the
Companies' Creditors Arrangement Act ("CCAA") at the time the loan
was originally written (the "CCAA Loan"), and (ii) a net increase
of $1 million to existing loans.
The CCAA Loan was structured to provide the borrower adequate
flexibility in order to execute on its plans and allow it to emerge
from CCAA protection. We are pleased to report that the
borrower has emerged from CCAA protection as was anticipated and as
a result of the partial repayment, it now has a much improved and
sustainable capital structure that we believe may soon support
conventional financing.
It is our intention to inform the market when the size of the
loan portfolio changes by approximately $70
- $75 million, which may be adjusted as the size of the
portfolio changes. Callidus' deal pipeline of potential loans
has remained relatively stable with a total value of approximately
$469 million, of which $195 million represents term sheets that have
been signed back by the borrowers, an increase of $15 million and $8
million respectively from the December 23, 2014 news release. As
previously disclosed, Callidus undertakes extensive due diligence
before closing on a loan transaction and has historically closed on
60% to 80% of signed back term sheets. Despite the growth in
the loan portfolio, the realized losses experienced in the
portfolio continue to remain below the level experienced at the
time of the Company's initial public offering - both in absolute
amounts and as a percentage of gross loans receivable - and below
amounts recorded in our loan loss provision. Management
believes this reflects its conscious effort to maintain the credit
quality while continuing to grow the business.
Closing of Expansion of Revolving Senior Credit
Facility
Callidus has increased the amount of its existing
revolving senior credit facility by USD $62.5 million to USD $262.5 million in the aggregate and has extended
its term to January 15, 2019.
Two major Canadian chartered banks have committed the
incremental USD $62.5 million.
Management intends to negotiate further increases in this
facility as the amount of gross loans receivable increases.
Clarification of Loan Loss Guarantee
As disclosed at
the time of the Callidus initial public offering, the Catalyst
Funds provided a principal guarantee with respect to loans in
existence at that time and agreed to provide a guarantee in
connection with any future sales by them of loan participations in
the Callidus loan portfolio to Callidus. Accordingly, as
previously announced, on December 23,
2014, Catalyst Fund Limited Partnership IV ("Fund IV") sold
$50 million of loan participations in
the Callidus' loan portfolio to Callidus and provided a principal
guarantee related to the sale of the loan participations.
As of the fourth quarter of 2014 and in connection with
negotiations in relation to the purchase by Callidus of the
$50 million of loan participations
from Catalyst, the companies sought to clarify the terms of both
Catalyst guarantees. As a result, the guarantee given at the
time of the initial public offering covers all losses of principal
on certain specified loans up to the previously authorized amount
of same (as adjusted from time to time by the Callidus Credit
Committee so long as Newton Glassman
is a member of that committee and is in favour) even if advanced
subsequent to the initial public offering including the loan loss
provision of $18.3 million recorded
on Callidus' books as at September
30, 2014. Subject to the foregoing, the guarantee will
not apply to other amounts such as advances to pay interest or fees
(subject to one non-material exception). The guarantee will
remain in effect for loans that were not on Callidus' watch list at
the time of the initial public offering until they are renewed at
the next scheduled credit review following that offering. The
guarantee will also remain in effect permanently for loans on the
watch list at the time of the initial public offering and loans
that become subject to realization proceedings prior to that next
scheduled review so long as those loans remain
outstanding.
Fund IV's guarantee in relation to the sale of the $50 million of loan participations covers
Catalyst's percentage ownership interest in the relevant loans at
the time of sale to Callidus of all losses of principal experienced
on the relevant loans up to the previously authorized amount of
same (as adjusted from time to time by the Callidus Credit
Committee so long as Newton Glassman
is a member of that committee and is in favour) even if advanced
subsequent to the sale to Callidus. The guarantee will not
apply to other amounts such as advances to pay interest or
fees. The guarantee will remain in effect for loans that are
not on Callidus' watch list at the time of purchase of the loan
participations until the relevant loans are renewed at the next
scheduled credit review. The guarantee will also will remain
in effect for loans on the watch list at the time of purchase of
the loan participations or loans that become subject to realization
proceedings prior to their next scheduled review so long as those
loans remain outstanding.
As previously announced, neither guarantee applies to accrued
and unpaid interest (subject to one non-material exception).
Callidus normally requires that its borrowers agree to a cash sweep
arrangement so that their cash will typically be subject to
Callidus control. In connection with clarifying the Catalyst
guarantee arrangements, Callidus and Catalyst have agreed as
between themselves that Callidus will operate the cash sweep
internally so that first application of a borrower's cash will be
to currently due accrued and unpaid interest and fees and the
second application of cash will be to principal and other amounts
that are due. These cash sweep arrangements should generally
serve to minimize losses in relation to interest and fees even in
circumstances where Callidus would need to rely upon a Catalyst
guarantee in order to avoid a loss of principal.
As a result and based upon discussions with our auditors and our
audit committee, Callidus is expecting to record the guarantee to
offset the loan loss provisions previously taken against principal
where such loan losses are covered under the guarantees. As
at September 30, 2014, the Company
had reported loan loss provisions in respect of principal of
approximately $18.3 million before
derecognition. These loan loss provisions are being treated
as fully covered under the guarantees, consistent with the previous
public statements of Callidus' Chief Executive Officer that as at
September 30, 2014 Callidus had no
non-performing loans after giving effect to Catalyst's guarantee
given at the time of the initial public offering.
Separately, effective December 31,
2014, the Company will establish a collective allowance on
loans in addition to the specific provisions currently
recorded. This practice will better reflect the risk profile
of the Company's growing loan portfolio. We are currently
completing our year-end results and will finalize the amount of a
collective allowance as at year end as part of that process.
For illustrative purposes, the impact of the clarification of
the loan loss guarantee and recording of a collective allowance as
at September 30, 2014, would have
resulted in a one-time $13.0 million
increase in net income before income taxes attributable to
recording the fair value of the Catalyst guarantees of
approximately $18.3 million net
of a $5.3 million collective
allowance.
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.
Non-IFRS Measures
This press release
contains references to gross loans receivable, which is not a
generally accepted accounting measure under International Financial
Reporting Standards and therefore the definition used by the
Company may differ from the definition of such term used by other
entities. The Company defines "gross loans receivable" as the
sum of (i) the aggregate amount of loans receivable on the relevant
date, (ii) the loan loss allowance on such date, (iii) the book
value of assets held for sale as they appear on the balance sheet,
and (iv) discounts on loan acquisitions. Management believes that
gross loans receivable is a useful supplemental measure that may
assist purchasers in assessing the financial performance and the
cash anticipated to be generated by the Company's business.
Gross loans receivable should not be considered as the sole
measure of the Company's performance and should not be considered
in isolation from, or as a substitute for, analysis of the
Company's financial statements.
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.
SOURCE Callidus Capital Corporation