09:34:13 EST Tue 25 Feb 2025
Enter Symbol
or Name
USA
CA



Login ID:
Password:
Save
Axis Auto Finance Inc
Symbol AXIS
Shares Issued 121,374,164
Close 2024-10-21 C$ 0.015
Market Cap C$ 1,820,612
Recent Sedar Documents

Axis to sell auto loan assets to Fionic for $114M

2024-10-21 18:20 ET - News Release

Mr. Todd Hudson reports

AXIS ENTERS INTO ASSET PURCHASE AGREEMENT FOR SALE OF AUTO FINANCE BUSINESS

Further to the press releases dated Aug. 20, 2024, and May 15, 2024, Axis Auto Finance Inc. and its operating subsidiaries involved in the company's auto finance business have entered into an asset purchase agreement with Fionic Canada Ltd. and an affiliate of Fionic in respect of their acquisition of the auto loan assets and undertaking of Axis through the acquisition of certain assets and assumption of certain liabilities of Axis and its subsidiaries relating to the company's auto finance business. The base purchase price for the assets is approximately $114-million (subject to adjustments for changes in the composition of the auto loan assets and fair market value of inventory since Dec. 31, 2023). Fionic is an arm's-length party to Axis and its affiliates, and the transaction was negotiated on an arm's-length basis.

The company intends to mail a management information circular to shareholders in connection with a shareholders meeting to be held in connection with the approval of the proposed transaction in the coming weeks and expects to hold a meeting of shareholders in late November. Additional details regarding the terms and conditions of the transaction, as well as the rationale for the approvals made by the special committee and the board, will be set out in the circular, which, together with the asset purchase agreement, will be available under the company's SEDAR+ profile.

Special committee and board approval

The company formed a special committee led by Wes Neichenbauer and composed of two other independent directors of the company to assist with the company's strategic review and the review of the proposed transaction. After receiving a fairness opinion from Evans & Evans Inc., with respect to the consideration being received in respect of the proposed transaction, the special committee unanimously recommended that the board of directors of the company approve the proposed transaction. After receiving the fairness opinion from Evans & Evans, legal and financial advice, and the recommendation of the special committee, and after taking into account the alternatives available to the company, the board unanimously determined that the proposed transaction is in the best interests of the company and is fair to the company's securityholders.

Shareholder and debentureholder approval

Given that the proposed transaction involves the sale of all or substantially all of the company's assets, the transaction will require the approval of two-thirds of votes cast by shareholders of the company at a meeting expected to be held in early December. In connection with the execution of the agreement, Axis has obtained voting support agreements from the holders of approximately 47 per cent of the company's outstanding shares, pursuant to which they have agreed, subject to the terms thereof, to vote in favour of the proposed transaction.

In addition, as a condition to the closing of the transaction, the company has obtained the approval of the requisite majority of the holders of its outstanding debentures to revise the terms of such debentures to provide for a redemption right that will allow the company to redeem the outstanding debentures (if the proposed transaction closes on or before Dec. 31, 2024) in exchange for a payment equal to the outstanding interest owing up to the redemption date and further payments against principal of between 80 and 85 per cent of the principal amount thereof. The debentures at issue are both the unsecured subordinated debentures issued on Sept. 11, 2023, and the 7.5 per cent extendable unsecured convertible subordinated debentures issued in April, 2018.

At present, it is not anticipated that there will be any assets remaining for shareholders following the repayment of amounts owing to the company's creditors, and it is expected that the company's common shares will be delisted from the Toronto Stock Exchange shortly following the closing.

Fairness opinion

The special committee retained Evans & Evans to provide a fairness opinion with respect to the fairness of the proposed transaction from a financial standpoint to Axis and the shareholders of Axis. Evans & Evans provided an opinion that, based upon and subject to the assumptions, limitations and qualifications contained in Evans & Evans's written fairness opinion, the purchase price is fair, from a financial point of view, to the Axis shareholders. The fairness opinion will be included in the circular.

Related-party transaction

Approximately $3,292,000 principal amount of debentures are held by certain officers and directors of the company or their affiliates. Specifically, $1,572,000 principal amount of the April, 2018, debentures are held by related parties (being $1,068,000 held by affiliates of Mr. Neichenbauer and $504,000 held by affiliates of Todd Hudson), and $1.72-million principal amount of the September, 2023, debentures are held by related parties (being $1.32-million held by affiliates of Ian Anderson and Paul Kerwin, $200,000 held by affiliates of Mr. Neichenbauer, $100,000 held by Ilja Troitschanski, and $100,000 held by Mr. Hudson). Those related parties who are also directors of the company recused themselves from voting on the approval of the amendments to the terms of the debentures. The above referenced amendments to the April, 2018, and September, 2023, debentures may be considered to be related-party transactions for the purposes of National Instrument 61-101 (Protection of Minority Security Holders in Special Transactions), and the company will rely on the exemptions from the valuation and minority approval requirements contained in sections 5.5(g) and 5.7(1)(e) of National Instrument 61-101 (financial hardship), respectively.

Credit agreement update

Although the company has not received a formal waiver of the covenant breaches under its senior credit facility past Oct. 1, 2024, the company has received confirmation from its financing syndicate that it is supportive of the proposed transaction. The company continues to work with its funders under the senior credit facility to obtain a formal waiver that will extend to a date that will permit the closing of the proposed transaction. One of funders in the senior credit facility financing syndicate independently holds the master loan program agreement financing facility, which was also in covenant breach at the time the company reported its 2024 fiscal year-end financial results on Sept. 27, 2024, and this continues to be the case. The company has received confirmation from its MLPA financing partner that it is supportive of the proposed transaction and continues to work with this financing partner to obtain a formal waiver of the breach that will permit the closing of the proposed transaction. The company will provide a further update if and when formal waivers are obtained.

About Axis Auto Finance Inc.

Axis is a fintech lender providing alternative used vehicle financing options to non-prime borrowers. Axis loans are offered through automotive dealers to approximately 30 per cent of Canadians (source: Equifax) who have credit scores in the non-prime range. All Axis auto loans report to the credit bureau, resulting in over 70 per cent of customers seeing a significant improvement of their credit scores.

We seek Safe Harbor.

© 2025 Canjex Publishing Ltd. All rights reserved.