Founders Advantage Capital Corp.
TSX VENTURE : FCF

Founders Advantage Capital Corp.

September 26, 2016 07:30 ET

DLC Adopts Monthly Cash Distribution Policy

CALGARY, ALBERTA--(Marketwired - Sept. 26, 2016) - Founders Advantage Capital Corp. (TSX VENTURE:FCF) (the "Corporation") is pleased to announce that the Board of Directors of Dominion Lending Centre Group of Companies ("DLC") has resolved to distribute $900,000 of monthly cash distributions to its securityholders commencing in October, 2016. As the Corporation holds a 60% interest in DLC, the Corporation anticipates receiving after-tax cash distributions of $540,000 per month ($6.5 million annually) from DLC. As the DLC entities are taxed at the operating entity level, no additional tax amounts are payable by the Corporation on the cash distributions received from DLC.

As previously disclosed, the Corporation is entitled to 60% of all annual cash distributions from DLC up to $14.6 million (the "Annual Distribution Threshold") and the Corporation is entitled to 30% of annual cash distributions exceeding $14.6 million. It was initially anticipated that the Corporation would receive annual taxable cash distributions of $8.8 million from DLC in the event the Annual Distribution Threshold was met (or approximately $6.4 annually after-tax). However, the transaction was ultimately structured such that the tax liability is at the DLC operating entity level, whereby the cash distributions to securityholders are received on an after-tax basis. As such, the Corporation now anticipates receiving $6.5 million per annum without any additional tax amounts owed on such distributions. Accordingly, the cash distributions from DLC are consistent with the Corporation's initial expectations.

Stephen Reid, President and Chief Executive Officer of the Corporation noted, "We are delighted that the DLC Board of Directors has adopted a sustainable cash distribution policy and that we are now receiving monthly cash distributions from our first investment."

About Founders Advantage Capital Corp.

The Corporation is listed on the TSX Venture Exchange as an Investment Issuer (Tier 1) and employs a passive and permanent investment approach. The Corporation has developed an investment approach 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. The Corporation 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 disproportionate 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 maintain operational control with a long-term and passive partner.

The Corporation's common shares are listed on the TSX Venture Exchange under the symbol "FCF".

For further information please refer to the Corporation's website at www.advantagecapital.ca.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Cautionary Statement Regarding Forward-Looking Information

Certain statements in this document constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate", "believe", "estimate", "will", "expect", "plan", "schedule", "intend", "propose", or similar words suggesting future outcomes or an outlook. Forward-looking information in this document includes, but is not limited to:

  • The Corporation's monthly cash distributions from DLC; and
  • The Corporation's annual cash distributions from DLC.

Such forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this document:

  • That DLC free cash flow will remain constant for the foreseeable future;
  • That DLC will not need to decrease cash distributions to fund capital expenditures;
  • That the DLC cash distribution policy will continue to be acceptable to DLC's lenders;
  • The DLC Board will not alter the DLC cash distribution policy for the following 12 months; and
  • Applicable tax rates remain unchanged.

Although the Corporation believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on them as the Corporation can give no assurance that such expectations will prove to be correct. Forward-looking information is based on expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Corporation and described in the forward-looking information. The material risks and uncertainties include, but are not limited to:

  • Changes in inflation, interest rates, employment levels, availability and cost of financing for home buyers, competitive and market demand dynamics in key markets, the supply of available new or existing homes for sale, and overall housing prices may put downward pressure on the Canadian real estate market. This may adversely impact the number of mortgage brokers which could negatively impact the DLC franchisees and their ability to pay franchise fees to DLC.
  • Changes in general economic variables including, among others, short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, levels of unemployment, consumer confidence and the general condition of the Canadian, North American and World economies. Lack of available credit or lack of confidence in the financial sector could materially and adversely affect DLC's business.
  • Lenders applying more stringent mortgage underwriting standards could adversely affect the ability and willingness of prospective buyers to finance home purchases or to sell their existing homes which would adversely impact the DLC business.
  • Changes in federal, provincial, and municipal laws or regulations governing the ownership, leasing, development and taxation of real property could affect the market demand dynamics and the supply of available new or existing homes for sale, which may adversely impact the DLC business.

The foregoing list of risks is not exhaustive. For more information relating to risks, see the section titled "Risk Factors" in the Corporation's current annual information form. The forward-looking information contained in this document is made as of the date hereof and, except as required by applicable securities law, the Corporation undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.

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