NOT FOR DISTRIBUTION OR DISSEMINATION INTO THE UNITED STATES OR THROUGH U.S. NEWSWIRE SERVICES
Toronto, Ontario – May 5, 2021. MCAN Mortgage Corporation (“MCAN”, the “Company” or “we”) (TSX: “MKP”) today announced that it is offering rights (the “Rights Offering”) to eligible holders of its common shares (the “Common Shares”) of record at the close of business on May 12, 2021 (the “Record Date”).
Pursuant to the Rights Offering, each holder of Common Shares will receive one right (a “Right”) for each Common Share held. Every 20 Rights will entitle the holder to subscribe for one whole Common Share of the Company at a price of $15.65 per Common Share (the “Subscription Price”).
MCAN expects to raise gross proceeds of approximately $20.4 million from the Rights Offering and intends to use all of the proceeds less offering expenses to fund the Company’s mortgage lending and investment business. The expected closing date of the Rights Offering is June 10, 2021.
“As MCAN continues to show solid growth, we require capital in order to fund our core business, while maintaining adequate amounts of regulatory capital as a federally-regulated financial institution,” said Karen Weaver, President and Chief Executive Officer. “Growth in our corporate assets exceeded 14% in 2020, above our 10% target for the second year in a row. We have a strong pipeline in 2021 with robust mortgage market activity. We are seeking capital to fund this and our continued planned growth. Raising capital through a Rights Offering provides a benefit to existing shareholders in terms of the cost of capital raises and the value provided to existing shareholders should they choose to subscribe. Over the years, our shareholders have supported and participated in our previous rights offerings, resulting in full subscriptions.”
Directors and senior officers, collectively holding approximately 4.4 million Common Shares (including major shareholder Ian Sutherland), have indicated their intention to exercise some or all of their Rights, subject to market conditions. As well, KingSett Canadian Real Estate Income Fund, an institutional shareholder with a significant position in the Company’s Common Shares, has indicated its intention to exercise all of its Rights, subject to market conditions.
The Company will release its Q1 2021 earnings on May 11, 2021 and we invite you to join us at our virtual Annual and Special Meeting of Shareholders at 4:30 p.m. (Toronto time), also on May 11, 2021. Details of how to attend are on our website.
The Rights will trade on the Toronto Stock Exchange under the symbol MKP.RT commencing on May 11, 2021 and will cease trading at 12:00 p.m. (Toronto time) on June 7, 2021. The ex-rights trading date for the Common Shares on the Toronto Stock Exchange will be May 11, 2021. This means that Common Shares purchased on or following May 11, 2021 will not be entitled to receive Rights under the Rights Offering. Rights are exercisable until 5:00 p.m. (Toronto time) on Jun 7, 2021 (the “Expiry Time”), after which time unexercised Rights will be void and of no value. Shareholders must hold at least 20 Common Shares to exercise their Rights, as no fractional Common Shares will be issued.
The Rights Offering includes an additional subscription privilege under which eligible holders of Rights who fully exercise their Rights will be entitled to subscribe for additional Common Shares, if available, that are not otherwise subscribed for in the Rights Offering.
There are currently 26,129,351 Common Shares outstanding. Following completion of the Rights Offering, MCAN expects that there will be approximately 27,435,818 Common Shares outstanding.
The Rights Offering will be conducted only in the provinces and territories of Canada (the “Eligible Jurisdictions”). Accordingly, and subject to the detailed provisions of a Rights Offering circular (the “Circular”), Rights will not be delivered to, nor will they be exercisable by, persons resident outside of the Eligible Jurisdictions. Rather, such Rights may be sold on their behalf.
Details of the Rights Offering will be set out in a Notice and Circular, which are available under the Company’s profile on SEDAR at www.sedar.com. The Notice and accompanying direct registration system statement and subscription form (the “Rights DRS Advice”) will be mailed to each eligible shareholder of MCAN as at the Record Date. To subscribe, registered shareholders must forward the completed Rights DRS Advice, together with the applicable funds, to the depositary and subscription agent, Computershare Investor Services, Inc., prior to the Expiry Time. Shareholders who own their Common Shares through an intermediary, such as a bank, trust company, securities dealer or broker, will receive materials and instructions from their intermediary.
The Rights and the Common Shares issuable upon exercise of the Rights have not been, and will not be, registered under the United States Securities Act of 1933, as amended, and accordingly, the Rights and the Common Shares are not being publicly offered for sale in the “United States” or to “U.S. persons” (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended). This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. There shall be no sale of the securities in any jurisdiction in which an offer to sell, a solicitation of an offer to buy or a sale would be unlawful.
MCAN is a public company listed on the Toronto Stock Exchange under the symbol MKP and is a reporting issuer in all provinces and territories in Canada. MCAN also qualifies as a mortgage investment corporation (“MIC”) under the Income Tax Act (Canada) (the “Tax Act”).
The Company’s primary objective is to generate a reliable stream of income by investing in a diversified portfolio of Canadian mortgages, including single family residential, residential construction, non-residential construction and commercial loans, as well as other types of securities, loans and real estate investments. MCAN employs leverage by issuing term deposits that are eligible for Canada Deposit Insurance Corporation deposit insurance and are sourced through a network of independent financial agents. We manage our capital and asset balances based on the regulations and limits of both the Tax Act and OSFI.
As a MIC, we are entitled to deduct the dividends that we pay to shareholders from our taxable income. Regular dividends are treated as interest income to shareholders for income tax purposes. We are also able to pay capital gains dividends, which would be treated as capital gains to shareholders for income tax purposes. Dividends paid to foreign investors may be subject to withholding taxes. To meet the MIC criteria, 67% of our non-consolidated assets measured on a tax basis are required to be held in cash or cash equivalents and residential mortgages.
MCAN’s wholly-owned subsidiary, XMC Mortgage Corporation, is an originator of single family residential mortgage products across Canada.
For further information, please contact:
MCAN Mortgage Corporation
President and Chief Executive Officer
Vice President & Chief Financial Officer
A CAUTION ABOUT FORWARD-LOOKING INFORMATION AND STATEMENTS
This news release contains “forward-looking information” within the meaning of applicable securities laws. Forward-looking information can be identified by words such as: “expect”, “intend,” “plan,” “seek,” “believe,” “estimate,” “future,” “likely,” “may,” “should,” “will” and similar forward-looking language. The expected proceeds to be raised under the Rights Offering and the use thereof constitutes forward-looking information. The forward-looking information contained in this news release is based on a number of assumptions which we believe to be reasonable, including assumptions relating to the completion of the Rights Offering and the timing thereof, the amount of proceeds raised, and the expected use of proceeds from the Rights Offering. Forward-looking information entails various risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking information. Risks that could cause actual results to differ materially from those expressed or implied in the forward-looking information contained in this press release include, but are not limited to, that shareholders will not exercise all or any portion of the Rights, that the Company may not be able to find a suitable use of the proceeds of the Rights Offering, the level of dilution that will be experienced by shareholders who do not exercise all or a portion of their Rights, failure to complete or a delay in the Rights Offering for any other reason, the lack of a trading market for the Rights developing and the trading price of the Common Shares following completion of the offering. In addition, general risks relating to capital markets, economic conditions, regulatory changes, as well as the operations of our business may also cause actual results to differ materially from those expressed or implied in such forward-looking information. Forward-looking information is not a guarantee of future performance, and management’s assumptions upon which such forward-looking information are based may prove to be incorrect. Investors are cautioned not to place undue reliance on any forward-looking information contained herein. The Company disclaims any obligation to update or revise any forward-looking information contained in this news release, whether as a result of new information, future events or otherwise, except to the extent required by law.