Element Financial Corporation
TSX : EFN

Element Financial Corporation

June 18, 2014 08:41 ET

Element Financial Announces Closing of Offering of Subscription Receipts, Debentures and Series E Preferred Shares for Aggregate Gross Proceeds of $1.42 Billion

TORONTO, ONTARIO--(Marketwired - June 18, 2014) -

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This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Element Financial Corporation (TSX:EFN) ("Element" or the "Company"), one of North America's leading equipment finance companies, announced today that it has closed its previously announced prospectus offering (the "Offering") of subscription receipts ("Subscription Receipts"), 5.125% extendible convertible unsecured subordinated debentures ("Debentures") and 6.40% cumulative 5-year rate reset preferred shares, Series E ("Series E Shares"). The Offering raised gross proceeds of $1.42 billion, which proceeds will be used principally to fund Element's previously announced acquisition of PHH Corporation's (PHH) North American fleet management services business (the "Acquisition") and to finance the Company's stronger than forecast organic growth.

Element issued, on a bought deal basis, a total of (i) 74,416,500 Subscription Receipts at a price of $12.75 per Subscription Receipt for gross proceeds of approximately $949.0 million; (ii) $345,000,000 aggregate principal amount of Debentures; and (iii) 5,000,000 Series E Shares at a price of $25.00 per share for gross proceeds of $125,000,000. The Offering included the exercise in full by the Subscription Receipt Underwriters and the Debenture Underwriters (each as defined below) of the 15% over-allotment options to purchase (i) an additional 9,706,500 Subscription Receipts, and (ii) an additional $45.0 million aggregate principal amount of Debentures, each on the same terms as the initial offering, resulting in additional gross proceeds of $168.75 million.

"Deploying this capital to close the acquisition of PHH's North American fleet management business more than doubles our asset base to $10 billion and sets Element on a course to deliver increased leverage, reduced funding costs and strong origination growth from each of our four business verticals - Commercial & Vendor Finance, Aviation Finance, Railcar Finance and Fleet Management," said Steven K. Hudson, Element's Chairman and Chief Executive Officer.

Element anticipates that its tangible leverage will increase to 4.0:1 on closing of the Acquisition, which is expected to occur on or before July 31, 2014. Assuming anticipated continued organic growth in each of its four North American verticals, Element expects to grow its balance sheet to achieve a target tangible leverage ratio of 5.5:1 by December 31, 2016.

On June 2, 2014, Element entered into a definitive agreement with PHH to acquire the PHH Arval fleet management services business for approximately US$1.4 billion. Pursuant to the Acquisition, Element will also assume, subject to certain conditions, certain financing programs and securitization conduits of PHH related to the fleet management business. Upon completion of the Acquisition, Element will add more than US$4.6 billion in total assets to its balance sheet. See Element's press release dated June 2, 2014 entitled "Element Signs Definitive Agreement to Acquire PHH's North American Fleet Management Business".

The offering of the Subscription Receipts was conducted by a syndicate of underwriters co-led by BMO Nesbitt Burns Inc., CIBC World Markets Inc., GMP Securities L.P., Barclays Capital Canada Inc., National Bank Financial Inc. and TD Securities Inc. and including Credit Suisse Securities (Canada) Inc., RBC Dominion Securities Inc., Scotia Capital Inc., Cormark Securities Inc. and Manulife Securities Incorporated (the "Subscription Receipt Underwriters"). The offering of the Debentures was conducted by a syndicate of underwriters co-led by BMO Nesbitt Burns Inc., CIBC World Markets Inc., GMP Securities L.P., National Bank Financial Inc. and TD Securities Inc. and including Barclays Capital Canada Inc., Credit Suisse Securities (Canada) Inc., RBC Dominion Securities Inc., Scotia Capital Inc., Cormark Securities Inc. and Manulife Securities Incorporated (the "Debenture Underwriters"). The offering of Series E Shares was conducted by a syndicate of underwriters co-led by BMO Nesbitt Burns Inc., CIBC World Markets Inc., GMP Securities L.P., National Bank Financial Inc. and TD Securities Inc. and including RBC Dominion Securities Inc., Scotia Capital Inc., Cormark Securities Inc. and Manulife Securities Incorporated.

Further details concerning the Subscription Receipts, the Debentures, the Series E Shares and the Acquisition are set out in Element's short form prospectus dated June 11, 2014, available on SEDAR at www.sedar.com.

The Subscription Receipts, the Debentures and the Series E Shares will commence trading today on the Toronto Stock Exchange under the symbols "EFN.R", "EFN.DB" and "EFN.PR.E.", respectively.

About Element Financial Corporation

With total assets expected to reach $10 billion following the closing of the Acquisition,, Element Financial Corporation is one of North America's leading equipment finance companies. Element operates across North America in four verticals of the equipment finance market - Commercial & Vendor Finance, Aviation Finance, Railcar Finance and Fleet Management.

Forward Looking Statements

This release includes forward-looking statements regarding Element and its business. Such statements are based on the current expectations and views of future events of Element's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements. Forward-looking statements in this release include those related to the acquisition by Element of PHH Corporation's North American Fleet Management Services business, the benefits arising from that acquisition and the achievement of anticipated origination, cost of funding and tangible leverage targets. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Element, including risks regarding the equipment finance industry, economic factors and many other factors beyond the control of Element. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Element undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

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