Founders Advantage Capital Corp. (TSX-V: FCF) has secured a US $75 million senior secured credit facility (Senior Facility) with Sagard Holdings ULC, pursuant to which Sagard Credit Partners will be the lender. The initial draw at closing is US $42 million, with additional draws subject to Sagard Holding’s further approval. The Senior Facility is expected to close on or about June 16, 2017.
Sagard Credit Partners, part of Sagard Holdings, is focused on providing debt capital to middle market companies in Canada and the US. Sagard Credit Partners provides custom-tailored debt solutions, focusing on the needs of the borrower, and looks to invest in companies where it can develop deep, long term relationships. Sagard Holdings is an investment firm based in New York and Toronto which invests long term equity and debt capital in middle market companies in the US and Canada through its affiliates, including Sagard Credit Partners.
Proceeds from the Senior Facility will be used to repay existing senior indebtedness, to complete further acquisitions and for general corporate purposes.
“After considering various capital alternatives, we believe we have found a strategic partner that will be transformational for our long-term growth and success. The strategic relationship with Sagard Holdings provides us with the liquidity and financial flexibility required to prudently execute our business plan of investing in scalable and defensive founder-run companies. The Sagard Holdings team shares our view of building long-term shareholder value through a diverse portfolio of partnerships in founder run, not for sale, high free cash-flow, stable and well managed premium companies,” said Stephen Reid, President & CEO of Founders Advantage Capital.
“We are very pleased to provide this facility to Founders Advantage, a team we have known for many years. Sagard Credit Partners is focused on providing credit to companies with strong fundamentals and where we have long-term relationships with management teams. We look forward to working closely with Founders to execute on the business plan and their growth strategy,” added Adam Vigna, Chief Investment Officer of Sagard Credit Partners.
The Senior Facility will have a five (5) year term and will bear interest at a rate of LIBOR plus 700 basis points (with a 1.00% LIBOR floor), payable quarterly on March 31, June 30, September 30 and December 31 each year. The Senior Facility will be secured by a first priority lien on all present and after-acquired assets of the Corporation. The borrowings under the Senior Facility are denominated in USD and the Corporation anticipates implementing a foreign currency hedging program to reduce currency risk.
As additional consideration for the Senior Facility, Founders Advantage Capital has agreed to issue Sagard Holdings 2,078,568 non-transferable common share purchase warrants, which warrants are equal to 5% of fully diluted common shares outstanding as at the date hereof. Each warrant entitles Sagard Holdings to acquire one common share at any time over the next five years upon payment of the warrant exercise price. The warrant exercise price for 1,039,284 warrants is $3.508 (a 15% premium to the 30 day VWAP of the common shares) and the exercise price for the remaining 1,039,284 warrants is $3.965 (a 30% premium to the 30 day VWAP of the common shares).
Calgary based Founders Advantage Capital Corp. aims to create long-term value for its shareholders and partner entrepreneurs (investees) by pursuing majority interest acquisitions of cash flow positive middle-market privately held entities. It seeks to win mandates by appealing to the segment of the market which is not aligned with traditional private equity control, royalty monetizations or related structures. The Corporation’s innovative platform offers incentives (contractually) for growth in favour of our partner entrepreneurs. This unique platform is designed to appeal to entrepreneurs who believe in the growth of their businesses and who want the added ability to continue to manage the business with a long-term partner.
photo credit: Founders Advantage Capital