Automotive Finco Corp. Announces New Loan with Strong Risk Adjusted Returns and Targeted Increase to Net Asset Value
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TORONTO, Nov. 18, 2022 (GLOBE NEWSWIRE) — Automotive Finco Corp. (NEX: AFCC-H) (“AFCC” or the “Company”) is pleased to announce that the Company, via Automotive Limited Partnership, has agreed to fund a new unsecured loan (the “Investment”) to AA Finance Co LP (“Investee”) of $21,000,000.
The Investment is being made in accordance with the Alliance Agreement, under which a Partnership Suitable Financing has been made available to Automotive Finance Limited Partnership with terms set out in the relevant ROFO notice. These terms were then modified through negotiation in the Company’s favor. The Investment will bear interest at 12.0% / annum, payable in cash or ‘PIK’, with a two year term and, under certain circumstances, will be convertible into equity of a related entity of the Investee. To the extent the convertible option is exercised, AFCC intends to distribute the equity received to its Shareholders, in its sole discretion. The proceeds of the Investment will be used by Investee for General Corporate Purposes which may include acquisitions and related working capital requirements.
The Board views the Investment as an attractive deployment of capital given the ability to lower the contractually set term of a Partnership Suitable Financing from 10 years to two years, an increase in the coupon rate to 12.0% (from 10.5%) as well as the ability to secure an option to convert the Investment into equity under certain circumstances. Assuming the loan is outstanding through maturity, the gross assets of the Company would be expected to increase, before the payment of dividends to shareholders and on a pre-tax basis, by approximately $0.25 / share by the end of the two year term.
The Company’s strategy is centered around a focus on shareholder aligned capital allocation. Since the Change of Business transaction in 2017, the Company has returned approximately $1.45 / per share(1) to its shareholders through a combination of dividends paid and declared and share buybacks. The Company will continue to focus on the attractive deployment of capital and shareholder returns via dividends going forward. As a result of the new Investment, the Company expects to maintain the dividend at its current level over the near term, subject to ongoing review to ensure its continued sustainability.
The Alliance Agreement and related documents are available on SEDAR.
About Automotive Finco Corp.
Automotive Finco Corp. is a finance company focused exclusively on the auto retail sector. In addition to its interest in Automotive Finance LP, the Company may also pursue other direct investments and financing opportunities across the auto retail sector.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For further information please refer to the Company’s website at www.autofincocorp.com or contact Shannon Penney, Chief Financial Officer, at shannon.penney@rogers.com or (905) 619-4996.
- Dividends paid and declared on current basic shares outstanding plus the value of Substantial Issuer Bid (“SIB”) that closed in March 2021 divided by the average of the basic shares outstanding immediately prior to the SIB and at June 30, 2022
