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RNP Royalty North to invest $6.8M in Advance Wire Products

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Beleggingsadvies 25/08/2017 16:52
Thu Aug 24 16:59:00 2017 EDT
Royalty North Partners Ltd (TSX-V:RNP)
Shares Issued 108,268,696
Last Close 8/22/2017 $0.135
Thursday August 24 2017 - News Release
Mr. Justin Currie reports

Royalty North Partners Ltd. has entered into a loan agreement with a newly formed entity based in British Columbia (AcquireCo). which will acquire the outstanding shares of Advance Wire Products Ltd. Immediately upon completion of the acquisition, AcquireCo and the target will amalgamate, with the amalgamated entity

(AWP) continuing to operate the purchased business.
The target, headquartered in Surrey, B.C., has been specializing in the design, prototyping and manufacturing of display fixtures and merchandising solutions since 1953. These highly specialized solutions are customized to meet clients' design and functionality requirements and can include various materials such as wood, wire, metal and plastic. Royalty North has worked with the target's existing management team (who will all be equity owners of AWP upon close of the transaction) to focus on maintaining the target's existing
customer base as well as growing the business by increasing sales to new and existing customers across North America.
Under the terms of the agreement, Royalty North will loan $6.8-million to AcquireCo upon receipt of all authorizations required in connection with the loan and completion, to its satisfaction, of its due diligence review and review of the terms of the acquisition. The loan will be repaid by way of monthly loan payments equal to a minimum annual loan payment plus a percentage of the gross sales of AWP. The fixed payment is $408,000 and the initial variable payment will be 4.35 per cent of gross sales. The loan proceeds, along with equity proceeds contributed by AcquireCo management and Royalty North, will be used by AcquireCo for the purchase price payable for the purchased business. Royalty North's equity contribution over and above the loan amount will be $200,000. Royalty North expects to finance the loan and equity contribution through the issuance of unsecured convertible debentures as well as a further drawdown of the company's senior credit facility. This agreement will represent Royalty North's fourth royalty investment since it initiated its change of business last year.

Justin Currie, chief executive officer of Royalty North, commented: "We are pleased to be able to support the management buyout of a local high-quality legacy business. The management team has been successfully operating the business for the last number of years, and it makes a lot of sense to see them in a position of ownership. Michael McAdam, whom I have known for many years, will be the new president of AWP postclose, and I have a high degree of confidence in his ability to elevate this great business to new levels going
forward. Furthermore, this transaction will add significant value for our existing shareholders without near-term share dilution and bolster our existing royalty investment portfolio."

Mr. McAdam, the future president of AWP, stated: "We are excited to be partnering with RNP on this transaction as their financing structure is particularly well suited to management buyout situations. They are a value-add partner who is aligned for growth and will allow us to acquire a 100-per-cent equity interest in the target while maintaining reasonable debt service levels and without numerous restrictive covenants."

Unsecured convertible debentures
In connection with the agreement and subject to the approval of the TSX Venture Exchange and the company's senior lender of the terms of the subordination of the debentures to the company's senior indebtedness,
the company will undertake a placement of unsecured convertible debentures in the amount of up to $6-million.
The debentures will have a three-year term, at which time they mature and become due and payable. The debentures will bear interest at 8 per cent per annum, payable quarterly, and allow holders of the debentures to convert their principal amount into common shares of Royalty North at a price of 20 cents per share at any time prior to the close of business on the earlier of the business day immediately preceding maturity and the business day immediately preceding the date fixed for redemption of the debentures.

Holders converting their debentures will, in addition to the applicable number of shares to be received on conversion, receive a cash payment for accrued and unpaid interest for the period from the last interest payment date prior to the date of conversion to the date of conversion. Royalty North may prepay the
outstanding principal amount of the debentures together with all accrued and unpaid interest at any time prior to the maturity date of the debentures according to a prepayment premium schedule.

The agreement, equity contribution and the debentures are all subject to customary approvals, including approval by Royalty North's board of directors and the TSX-V.

About Royalty North Partners Ltd.
Royalty North Partners is a Vancouver-based company focused on creating a diversified portfolio of cash-flowing royalties by providing financing to private businesses operating in the mid-market.
We seek Safe Harbor.

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