Dominion Lending Centres closed its new credit facilities with Toronto-Dominion Bank, the terms of which were previously announced by the Corporation on November 29, 2021.
The credit facilities are comprised of three senior term credit facilities (collectively, the “Senior Credit Facilities”) and a junior term credit facility (the “Junior Credit Facility”).
The Senior Credit Facilities provide the Corporation with a $5 million revolving working capital credit line; a $10 million revolving acquisition credit line; and a $20 million term loan to fund the Corporation’s issuer bid dated December 1, 2021 (the “Offer”) and a pro rata (40%) dividend to Preferred Shareholders. The Senior Credit Facilities are for a three (3) year term and are secured by a first charge over all of the Corporation’s “core business assets”. The proceeds from the Senior Credit Facilities will be used to: (i) replace the current credit facilities for the Core Business Operations; (ii) provide the Corporation with the necessary funding to complete the Offer; and (iii) provide the Preferred Shareholders with dividend in an amount equal to their pro rata share of the borrowings used to fund the Offer. The actual borrowings for the Offer are dependent on the actual number of common shares that are tendered to the Offer. Interest on the Senior Credit Facilities is based on the prime borrowing rate plus an additional amount determined based on the Corporation’s total leverage. On closing of the Senior Credit Facilities, the interest rate is anticipated to be equal to the prime borrowing rate. Upon completion of the Offer, any amounts undrawn on the $20 million credit line will be cancelled.
The Junior Credit Facility provides the Corporation with a $32 million term loan to facilitate the repayment of all indebtedness of the Corporation under the current Sagard credit facility and to terminate all existing foreign currency forward contracts. The Junior Credit Facility is for a three (3) year term and will be secured by a first charge over all of the Corporation’s “non-core business assets” and a junior security interest over the Corporation’s “core business assets” (subject to certain security-sharing rights of the Preferred Shareholders). Interest on the Junior Credit Facility is based on the prime borrowing rate plus an additional amount determined based on the Corporation’s total leverage. On closing of the Junior Credit Facility, the interest rate is anticipated to be prime plus 75 bps and any undrawn amount under the facility will be cancelled.
Gary Mauris, Executive Chairman and Chief Executive Officer of the Corporation commented: “We are pleased to announce the closing of the TD financing, the full repayment of the Sagard (USD) credit facility and closure of our foreign exchange forward contracts. Replacing our high yield debt with conventional bank financing is another step to further simplify our business. Given the meaningful reduction in our cost of capital, the new TD credit facilities provide significant savings to our shareholders and also provide DLCG with financial flexibility to pursue our growth objectives over fiscal 2022 and beyond.”
On closing, the acquisition credit facility (forming part of the Senior Credit Facilities) had a drawn balance of $6.2 million and the Junior Credit Facility had a drawn balance of $31.0 million.