- Loan purchase agreement until $ 150 million per year with Neuberger Berman Fund enables IOU to benefit from the economic recovery
- The fund managed by Neuberger Berman will also handle the non-brokered private placement of up to $ 2.1 million
- Neil Wolfson Become a member of the Board of Directors of IOU Financial Inc.
MONTREAL, 4th November 2020 / PRNewswire / – IOU FINANCIAL INC. (“IOU” or “the Company”) (TSXV: IOU), a leading online small business lender (IOUFinancial.com), IOU announces that it has entered into a loan purchase agreement (the “Loan Purchase Agreement”) with a fund managed by Neuberger Berman (“the Fund”) for up to. has completed $ 150 million per year for the next two years. Neuberger Berman is a privately owned, independent, employee owned investment manager $ 374 billion in assets under management.
In addition to the loan purchase agreement, IOU also announces that it intends to complete an unbroken private placement of 18,009,806 common shares of the company at a price of $ 0.1157 per common share (the “Purchase Price”) for gross proceeds of up to $ 2.1 million (the Offer “). As part of the Offer, the Fund has agreed to an investment of $ 1,812,565 15,665,839 common shares to be acquired. Upon completion of the offering, the Fund will own 15% of the company’s issued and outstanding common stock.
“This investment, through a fund managed by Neuberger Berman, represents a strong vote of confidence in the fundamental, long-term value of our business and is testament to IOU’s lending and service capabilities in addition to its capital markets capabilities,” said Phil Marleau, CEO of IOU.
The purchase price represents a premium of 37.5% on the volume-weighted average price of 5 trading days (the “VWAP”) of the common stock on the TSX-V as of the close of trading on November 4th, 2020. The net proceeds from the offering will strengthen the company’s financial position and will be used for general corporate purposes. The offering is subject to regulatory approval, including TSX-V approval.
IOU’s strategy has always been to maintain diversified sources of capital to fund both the loan portfolio and the servicing portfolio (loans serviced on behalf of third parties). Although the company was previously focused on expanding its loan portfolio, the COVID-19 pandemic and its impact on the IOU’s financial condition have required an adjustment to the company’s funding strategy to reduce the loan portfolio in favor of the servicing portfolio.
Return to profitability
In 2019 IOU had an adjusted net profit of approx. $ 1.8 million. Despite the setback caused by the COVID-19 pandemic, the company is working to bring its loan volume back to pre-pandemic levels. The Loan Purchase Agreement greatly strengthens IOU’s financing capabilities and facilitates a clear path to return to pre-pandemic lending volumes and return to profitability. The loan purchase agreement also puts the company in an excellent position to benefit from an eventual economic recovery.
Appointment of a new director
IOU is pleased to announce that it intends to cancel the appointment Neil Wolfson to his board of directors after the offer has been completed. Mr. Wolfson will also serve as a member of the company’s audit committee. Mr. Wolfson brings significant industry corporate governance experience to IOU as he was the longest serving director of On Deck Capital, Inc., a recently acquired competitor of IOU. He is currently an active investor and board member of numerous fintech companies.
In addition to his experience in corporate governance, Mr. Wolfson brings over 25 years of corporate governance and investment management experience with Wilmington Trust as former President and Chief Investment Officer at both SF Capital Group, a multi-generational single-family office, and IOU Investment Management, a $ 40 billion Investment Manager. Mr. Wolfson was previously a partner at KPMG LLP and a national partner for KPMG’s investment advisory service. Prior to that, he was with Kidder, Peabody & Co. for over a decade.
Other material objects
As part of the offer, an IOU insider, FinTech Ventures Fund, LLLP (“FinTech”) will purchase a total of 2,343,967 common shares for gross proceeds of approx $ 271,201 on a non-brokered basis (the “Insider Subscription”). FinTech currently owns or controls 11,248,704 common shares, representing approximately 13% of the company’s issued and outstanding common shares. Upon completion of the offering, FinTech will economically own or control 13,592,671 common shares, representing approximately 13% of the company’s issued and outstanding common shares.
The issuance of securities to FinTech can be viewed as a related party transaction for the purposes of Regulation 61-101 – Protection of minority paper holders in special transactions. However, the offering is exempt from the rating and minority approval requirements under this regulation as the fair market value of the Insider Subscriptions is less than 25 percent of the IOU’s market capitalization. The company’s board of directors has approved the offer. Lucas Timberlake, Member of the IOU Board of Directors and a partner at FinTech, expressed interest prior to approval by IOU’s Board of Directors and abstained.
In total, the company will issue 18,009,806 common shares to the Fund and FinTech for total gross proceeds of $ 2,083,766.
This press release does not constitute an offer to sell or a solicitation to buy, nor will any IOU securities be offered in any jurisdiction in which such offer, solicitation or sale would be unlawful. The common shares will be privately placed in Canada and only to “accredited investors” as that term is defined in applicable Canadian securities laws.
THE SECURITIES OFFERED ARE NOT REGISTERED UNDER THE 1933 US SECURITIES ACT, AMENDED (THE “1933 ACT”), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES LACK OF REGISTRATION UNDER OR APPLICABLE EXCEPTION TO THE REGISTRATION REQUIREMENTS OF ACT 1933.
About IOU Financial Inc.
IOU Financial Inc. caters to small businesses in the US and Canada Access to the capital they need to quickly capitalize on growth opportunities. In a unique approach to lending, IOU Financial’s advanced automated application and approval system accurately assesses applicants’ financial realities with an emphasis on daily cash flow trends. IOU Financial enables these companies to obtain term loans of up to six, nine, twelve, fifteen and eighteen months. to apply $ 500,000 to qualified US applicants ($ 150,000 in the Canada) within a few business days at affordable fees that are cheap for cash flow management. Its speed and transparency make IOU Financial a trustworthy alternative to banks. From June 30, 2020, IOU was born $ 836 million for loans to small businesses. To learn more, visit: IOUFinancial.com.
Certain information in this press release may contain forward-looking statements. Forward-looking statements are statements that are not statements of historical fact that discuss or discuss activities, events or developments that IOU expects or expects to occur in the future. These forward-looking statements can be identified by the use of words and expressions such as “expects”, “believes”, “estimates”, “expects”, “may”, “plans”, “projects”, “should”, “will” , “intends,” “seeks,” “permits,” “creates a path for,” “enables,” or the negative thereof, or other variations thereof In particular, this press release contains forward-looking statements, including, but not limited to, the Completion of the Offering and the Company’s Future Profitability These forward-looking statements are subject to significant known and unknown risks and uncertainties, some of which are beyond the control of IOU, including, but not limited to, the effects of general economic conditions, industry conditions, dependence on regulatory authorities and Shareholder approvals, execution of final documentation and obtaining regulatory approval pertaining to the offer, the uncertainty of obtaining additional financing, risks related to the company’s inability to implement its business plan, dependence on third-party providers, competition, dependence on key personnel, security and confidentiality risks, technological development risks, IT disruptions, maintenance of customer relationships and litigation risks No assurance can be given that any of the events expected from such statements will occur or, if so, what benefits IOU will derive from it. Readers are cautioned that the assumptions used in preparing this information, although believed to be reasonable at the time of preparation, may prove to be inaccurate and therefore no undue reliance should be placed on forward-looking statements. IOU assumes no obligation to update or revise its forward-looking statements, whether as a result of new information, future events or for any other reason. Further information on these and other factors can be found from page 21 under the heading “Risks and uncertainties” in the discussion and analysis of the IOU management from August 26, 2020which is available under the profile of IOU on SEDAR at www.sedar.com.
Neither the TSX Venture Exchange nor its regulator (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.
SOURCE IOU Financial Inc.