Trenchant Capital Corp. (TSX.V: TCC)
(“
Trenchant” or
the “
Company”) is pleased to announce that,
further to its news releases dated March 19, 2019 and May 30, 2019,
it has closed the second tranche of its prospectus offering
(the “
Debenture Offering”), of 8% Series B
secured convertible debentures of the Company
(the “
Debentures”), pursuant to which it has
raised gross proceeds of $1,761,000 through the issuance of 1,761
Debentures priced at $1,000 per Debenture. The Debenture Offering
is being completed pursuant to the final long form prospectus of
the Company dated May 8, 2019 (the “
Prospectus”).
The proceeds of the Debenture Offering, together with the proceeds
of the closing of the first tranche of the Debenture Offering and
the Company’s first Debenture Offering (the “
First Omni
Debenture Offering”), will be used to fund the Loan (as
defined herein). To date, the Company has raised gross aggregate
proceeds of $12,183,000 in connection with its two prospectus
offerings of Debentures.
The Debenture Offering was led by Industrial
Alliance Securities Inc., as lead agent, through a syndicate of
agents including Canaccord Genuity Corp., GMP Securities L.P.,
Raymond James Ltd., Echelon Wealth Partners Inc., PI Financial
Corp., Hampton Securities Limited and Integral Wealth Securities
Ltd. (collectively, the “Agents”). The Agents have
received a cash commission of 6.5% of the gross proceeds of the
Debenture Offering.
The Debenture Offering
The Debentures issued in the second tranche of
the Debenture Offering will mature on January 31, 2023 and the
outstanding principal of the Debentures will bear interest at the
rate of 8.0% per annum, payable quarterly in cash. The Debentures
will be governed by the terms and conditions of the trust indenture
dated March 23, 2018 (the “Trust Indenture”)
between the Company and Computershare Trust Company of Canada. The
Trust Indenture was entered into in connection with the First Omni
Debenture Offering which was completed pursuant to the Amended and
Restated Prospectus of the Company dated February 21, 2018 (the
“First Omni Debenture Prospectus”). A copy of the
Trust Indenture, the First Omni Debenture Prospectus and Prospectus
are available under the Company’s profile on SEDAR at
www.sedar.com.
Commencing on March 23, 2019, the outstanding
principal amount of the Debentures may be converted, at the option
of the holder, into common shares of the Company (each,
a “Common Share”) at a conversion price equal
to the greater of: (i) 95% of the volume weighted average trading
price of the Common Shares for the 30 trading-day period ending
three business days before the conversion date, and (ii) $1.25 per
Common Share, provided that, unless the conversion is being
effected in connection with a redemption by the Company, no more
than 25% of the aggregate principal amount of Debentures held by a
holder may be converted in any 180-day period.
The Company may prepay the outstanding principal
of the Debentures, and accrued but unpaid interest thereon, in
cash, at any time between March 24, 2020 and March 23, 2021 by
paying the holders 105% of the outstanding principal amount of the
Debentures, 103% of the outstanding principal amount of the
Debentures between March 24, 2021 and March 23, 2022, and 101% of
the outstanding principal amount of the Debentures between March
24, 2022 and January 30, 2023 (in any case, the “Break
Fee”), plus any accrued but unpaid interest thereon.
The Company has pledged all of the outstanding
shares of its wholly-owned subsidiary 1141864 B.C. Ltd.
(the “Lender”) to the holders of the
Debentures as security for the Company’s outstanding obligations
under the Debentures. The holders of the Debentures have no
recourse to the Company other than with respect to the shares of
the Lender. The Company intends to apply to list the Debentures on
the TSX Venture Exchange (the “TSXV”),
subject to approval of the TSXV and to there being a sufficient
number of holders to meet the TSXV’s distribution requirements.
The Omni Investment
The Company, through the Lender, intends to make
a fourth investment in the sum of $1,761,000
(the “Loan”) to ABO Healthcare Limited
Partnership (the “Borrower”) pursuant to a loan
agreement dated December 21, 2017, as amended (the “Loan
Agreement”). The Borrower is a limited partnership related
to the Hillcore Group (“Hillcore”). The Loan
Agreement is secured by the Borrower’s 88.73% indirect equity
interest in Omni Health Investments Inc. (“Omni”),
one of Canada’s largest long-term care operators.
Omni owns, operates and manages, under license
from the Ontario government, 18 long-term care homes located
throughout eastern and southwestern Ontario. Its corporate office
is located in Peterborough, Ontario. With 1,500 beds and over 1,700
employees, Omni is the sixth largest long-term care operator in
Canada measured by bed count. Omni has been recognized as one of
Canada’s Top 100 Employers on three occasions. For more details on
Omni see: omniway.ca.
The outstanding principal of the Loan will bear
interest at the rate of 10% per annum payable quarterly in cash and
payable on the maturity date of January 27, 2023. The Borrower has
paid the Company a fee equal to 7% of the funds advanced.
The Borrower has also granted the Company a
five-year unit purchase option entitling it to purchase up to 15%
of the Borrower’s indirect holdings in Omni. The actual
percentage interest that the Company may acquire pursuant to the
purchase option will be adjusted on a pro rata basis based on the
amount of funds actually advanced under the Loan
Agreement.
The Borrower may prepay the outstanding
principal of the Loan by paying the Lender the outstanding
principal amount of the Loan, plus any accrued and unpaid interest
thereon, as well as an amount equal to the Break Fee payable by the
Company on the redemption or repurchase of Debentures with a
principal amount of not more than the principal amount being
prepaid by the Borrower. The Loan is secured by a pledge of the
Borrower’s indirect 88.73% equity interest in Omni.
The Loan Agreement also provides that the Lender
will provide management services to the Borrower, have observer
rights at board meetings of the Borrower, and have the right to
appoint a nominee to the board of directors of the Borrower.
The Hillcore Group
Hillcore is a leading independent Canadian
investment and advisory firm that invests predominantly in the life
sciences, real estate, seniors living, financial, industrial and
energy sectors. With offices in Toronto, Vancouver, Calgary and
Montreal, Hillcore employs approximately 2,500 people throughout
Canada across its various groups and portfolio companies. Since
2005, Hillcore has completed acquisitions, directly or indirectly
through investment funds, with an aggregate asset value in excess
of $8.5 billion. Entities under management by Hillcore had an asset
value in excess of $4.5 billion as of December 31, 2018.
Hillcore Strategic Alliance
In 2016, the Company entered into a strategic
alliance with Hillcore that grants the Company rights of first
negotiation to provide special situation debt financing to
Hillcore’s pipeline of current and future private equity
investments. The Company expects that such financings may include
secondary, subordinated, mezzanine or non-traditional debt, asset
backed securities and back-leveraged/holdco debt. The Company has
also been granted certain back-in and tag along negotiation rights,
as well as negotiation rights, for capital market transactions with
respect to projects for which the Company has provided financing.
HCG5 Investment Limited Partnership (“HCG5”), a
limited partnership related to Hillcore, holds approximately 17.3%
of the issued and outstanding Common Shares.
MI 61-101 Disclosure
As HCG5 holds 17.3% of the issued and
outstanding Common Shares, the Loan constitutes a “related party
transaction” as such term is defined in Multilateral Instrument
61-101 – Protection of Minority Security Holders in Special
Transactions (“MI 61-101”), which requires that
the Company, in the absence of exemptions, obtain a formal
valuation for, and minority shareholder approval of, the related
party transaction. The Company is relying on the exemptions from
the formal valuation and minority shareholder approval requirements
set out in sections 5.5(e) and 5.7(c) of MI 61-101. The Loan and
related transactions are supported, and the Company anticipates
will be approved, by Eric Boehnke, a director of the Company who is
not an interested party to the Loan, and who owns 5,006,171 Common
Shares, representing approximately 43.0% of the issued and
outstanding Common Shares.
About Trenchant
The Company aims to become a diversified
investment and venture capital firm with a focus on providing
special situation debt financing to established companies with a
proven track record. The Company expects to benefit from its
strategic alliance with Hillcore, a leading independent Canadian
investment and advisory firm, that grants the Company rights of
first negotiation to provide financing and management services to
Hillcore’s pipeline of current and future private equity
investments.
Other Information
Please refer to the Company’s profile on SEDAR
at www.sedar.com for further particulars on the Debenture
Offering and the Company’s other investments.
ON BEHALF OF THE BOARD
TRENCHANT CAPITAL CORP.
Per: “Eric Boehnke”
Eric Boehnke, CEO
For further information, please contact:
Trenchant Capital Corp. Eric Boehnke, CEO Phone: (604)
307-4274
Neither TSXV nor its Regulation Services Provider
(as that term is defined in the policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this news
release.
Disclaimer for Forward-Looking
Information
This news release includes certain
“forward-looking statements” under applicable Canadian securities
legislation that are not historical facts. Forward-looking
statements involve risks, uncertainties, and other factors that
could cause actual results, performance, prospects, and
opportunities to differ materially from those expressed or implied
by such forward-looking statements. Forward-looking statements in
this news release include, among other things, statements regarding
the potential for listing of the Debentures on the TSXV, the Loan
and use of Loan proceeds. Forward-looking statements are
necessarily based on a number of estimates and assumptions that,
while considered reasonable, are subject to known and unknown
risks, uncertainties and other factors that may cause actual
results and future events to differ materially from those expressed
or implied by such forward-looking statements. Such factors
include, but are not limited to: the Company’s inability to apply
to list the Debentures on the TSXV; general business, economic and
social uncertainties; litigation, legislative, environmental and
other judicial, regulatory, political and competitive developments;
and other risks outside of the Company’s control. Although the
Company believes that the assumptions and factors used in preparing
the forward-looking statements are reasonable, undue reliance
should not be placed on these statements, which only apply as of
the date of this news release, and no assurance can be given that
such events will occur in the disclosed time frames or at all.
Except as required by applicable laws, the Company disclaims any
intention or obligation to update or revise any forward-looking
statement, whether as a result of new information, future events,
or otherwise.
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