TORONTO, ONTARIO--(Marketwired - April 21, 2014) - NorRock Realty Finance Corporation ("NorRock") (TSX VENTURE:RF.H), a company listed on the NEX board of the TSX Venture Exchange (the "Exchange"), is announcing an update to its proposed reactivation transaction with HighView Financial Holdings Inc. ("HighView").
As previously disclosed via press releases on June 12, 2013 and January 30, 2014, pursuant to a subscription agreement with HighView, NorRock intends to become HighView's strategic capital partner with its subscription for 7,000,000 common shares from treasury, such that NorRock shall own, on a fully diluted basis, 70% of the issued and outstanding common shares of HighView (the "HighView Shares") upon the closing of the transaction (the "HighView Acquisition").
HighView is currently controlled by Gary Brent and Mark Barnicutt who hold, directly and indirectly, approximately 70% of the HighView Shares. Upon the closing of the HighView Acquisition, HighView will continue to be led by Messrs. Brent and Barnicutt, together with the existing management and employee team. Pursuant to an equity incentive plan to be established by NorRock following the closing of the the HighView Acquisition, Messrs. Brent and Barnicutt along with other management shareholders of HighView will collectively be entitled to earn shares of HighView.
HighView is one of Canada's leading outsourced Chief Investment Officer (CIO) firms managing the private wealth of affluent families, the pension and investable assets of their businesses, and the foundations & endowments which they support. With approximately $900 million of client assets under its care (AUM & AUA) and growing, HighView services its clients directly and in partnership with its professional advisors.
NorRock has assessed a value of $6 million to HighView. As HighView's strategic capital partner, NorRock will be providing a combination of debt and equity capital, totaling approximately $3,500,000, to fund the long-term growth of HighView (which growth is anticipated to be derived both organically and through select acquisitions over the coming years). A portion of this funding will be NorRock's subscription for the 7,000,000 HighView Shares for $362,338.
The HighVew Acquisition is intended to constitute a reactivation transaction (the "Reactivation Transaction") of NorRock to enable it to list on the Exchange. The Reactivation Transaction will constitute a reverse takeover transaction ("RTO") as defined in Policy 5.2 of the Corporate Finance Manual of the Exchange.
In conjunction with the HighView Acquisition, NorRock shall acquire the current promissory note in the amount of $1,570,000 (the "GTAC Note") owed by HighView to Green Tree Acquisition Corp. ("GTAC") and accompanying security interests from GTAC in exchange for Class A Shares of NorRock. Subject to TSX Venture Exchange approval, the Class A Shares shall be issued at a deemed issuance price of $0.25 per share, being 6,280,000 Class A Shares based on the current principal amount of the GTAC Note.
NorRock has not had an active business since February 2012 when it sold substantially all of its assets. Following closing of the Reactivation Transaction, it is NorRock's intention to change its previous business focus from being a secured lender in the commercial real estate industry to carrying on business in the financial services industry with a focus on wealth management.
Recent HighView Financing
As part of the refinancing plan for HighView and NorRock, Radar Capital Fund I Limited Partnership ("Radar") closed a note financing with HighView for gross proceeds of $1,570,000 on April 15, 2014 (the "Radar Financing"), as evidenced by a promissory note (the "Radar Note"). In conjunction with the HighView Acquisition, NorRock shall acquire the Radar Note and accompanying security interests from Radar in exchange for Class A Shares of NorRock. Subject to TSX Venture Exchange approval, the Class A Shares shall be issued at a deemed issuance price of $0.25 per share, being 6,280,000 Class A Shares, provided that an aggregate of $3.0 million of gross proceeds is raised pursuant to the Financing Plan described below.
Radar is a fund controlled by Radar Capital Inc., a private capital firm investing in late stage private companies with a strong business plan and exceptional management that are looking for a partner to take them to the next stage in their evolution.
Following the Reactivation Transaction, each of Radar and GTAC shall have the right to nominate three directors to the board of NorRock, in each case one of the nominees shall meet the requirements for an independent director. It is currently expected that Mark Lerohl will be one of the Radar nominees and that Jacqueline Boddaert will continue on the board as one of the GTAC nominees.
Mark Lerohl has over 15 years of experience in the finance industry with more than a decade dedicated to investment banking.
In addition, Bruce Jackson, CFA, will be joining NorRock post the Reactivation Transaction in the role of Co-CEO. Mr. Jackson has twenty-eight years of foundation, family-office and corporate management experience and will be a welcome addition to the NorRock executive office.
In lieu of the previously contemplated and disclosed concurrent financing to be completed with the closing of the Reactivation Transaction, NorRock will proceed with the Subscription Receipt Financing (as defined below) and the Brokered Note Financing (as defined below).
Subscription Receipt Financing
NorRock has engaged M Partners Inc. (the "Agent") to offer and sell, on a best efforts basis, up to 14,000,000 subscription receipts of NorRock (the "Subscription Receipts"), at a price of $0.25 per Subscription Receipt, for aggregate gross proceeds to NorRock of up to $3,500,000 (the "Subscription Receipt Financing"). Proceeds raised will be used for business development, working capital purposes, and strategic acquisitions.
Each Subscription Receipt will be automatically exchanged, for no additional consideration, for one class A share of NorRock (a "Class A Share") on the completion of the Reactivation Transaction.
The gross proceeds from the Subscription Receipt Financing will be placed in escrow on closing and will be released to NorRock on the exchange of the Subscription Receipts for Class A Shares. If the Reactivation Transaction is not completed on or before the date that is six months from the date of closing of the Subscription Receipt Financing, the gross proceeds, together with all accrued interest, will be released from escrow and returned to the holders of the Subscription Receipts.
The escrowed funds will accrue interest at a rate of 7% while in escrow. Such interest will be payable to the holders of the Subscription Receipts, in cash, on exchange of the Subscription Receipts for Class A Shares or on the return of the escrowed funds.
Completion of the Subscription Receipt Financing (including the compensation payable to the Agent pursuant thereto) is subject to approval by TSX Venture Exchange.
Brokered Note Financing
The Agent has also been engaged by HighView to offer and sell, on a best efforts basis, up to $1,500,000 principal amount of exchangeable promissory notes (the "Brokered Notes") on a private placement basis at a price of $1 per $1 principal amount of a Brokered Note (the "Brokered Note Financing"). Proceeds raised will be used for business development and working capital purposes.
On the closing of the Reactivation Transaction, the Brokered Notes will automatically be exchanged for Class A Shares of NorRock at $0.25 per share.
The Brokered Notes will mature 24 months from the date of closing of the Brokered Note Financing. The Brokered Notes will bear interest at 9% per annum from closing, calculated monthly, accrued and payable on the earlier of the maturity date or completion of the Reactivation Transaction. The Brokered Notes will be secured by a general security agreement from HighView and its subsidiaries as applicable and will be subordinate to certain senior secured debt of HighView.
All of the securities issuable in connection with the Subscription Receipt Financing and the Class A Shares that may be issued in connection with the Brokered Note Financing will be subject to a hold period expiring four months and one day after the date of issuance of the Subscription Receipts or Brokered Notes, as applicable.
For their services in connection with the Subscription Receipt Financing and the Brokered Note Financing, at the closing of the applicable financing, HighView will pay to the Agent an aggregate cash commission equal to 5% of the gross proceeds of the Brokered Note Financing and NorRock will pay to the Agent an aggregate cash commission equal to 5% of the gross proceeds of the Subscription Receipt Financing. Notwithstanding the foregoing, with respect to President's List orders (orders received from either HighView or NorRock or the management of either HighView or NorRock which orders do not come in from a third party broker) HighView will pay an aggregate cash commission of 2.5% of the gross proceeds of such orders relating to the Brokered Note Financing and NorRock will pay an aggregate cash commission equal to 2.5% of the gross proceeds of such orders relating to the Subscription Receipt Financing.
On the closing of the Reactivation Transaction, NorRock will grant an option (the "Agent's Option") exercisable at any time up to 24 months following such closing to purchase up to that number of treasury shares of NorRock equal to (i) 7% of the number of Class A Shares of NorRock for which the Brokered Notes are exchanged, in accordance with the terms of the Brokered Note Financing at a price equal to $0.25 per Class A Share and (ii) 7% of the number of Subscription Receipts sold pursuant to the Subscription Receipt Financing at a price equal to $0.25 per share.
On the earlier of the closing of (i) the Reactivation Transaction and (ii) the Brokered Note Financing, HighView shall pay to the Agent a corporate finance fee of $25,000.
The exchange of the Brokered Notes and Subscription Receipts for Class A Shares is conditional on completion of the Reactivation Transaction, which transaction is itself conditional on a number of conditions including: (a) approval of the Reactivation Transaction from NorRock shareholders; (b) approval of the Reactivation Transaction from TSX Venture Exchange; (c) approval from securities regulators to the change of control of HighView; and (d) customary closing conditions for a transaction of this nature. There is no assurance that such conditions will be satisfied.
Summary Pro Forma Financial Information
A summary of the financial information for HighView and NorRock is as follows: Pro Forma, the Consolidated Balance Sheet at December 31, 2013 would reflect Current Assets of approximately $5.1 million of Total Assets of $10.0 million. Current Liabilities would be $2.3 million of Total Liabilities of $2.7 million, resulting in Total Equity of $7.3 million. This Pro Forma information reflects the above described Financing Plan as well as the Radar Financing.
Summary Historic Financial Information
A summary of the unaudited historic financial information for HighView as at December 31, 2013 or for the year ended December 31, 2013 is as follows: Current Assets were approximately $2.5 million of Total Assets of $2.9 million. Current Liabilities were $1.1 million of Total Liabilities of $6.9 million, resulting in negative Equity of $4.0 million. Revenue was $1.9 million for the year. The Loss from Operations was $0.6 million. Non-Operating Expenses and Unusual Items increased the Loss for the year to $1.5 million. As at February 28, 2014, HighView's Assets under Management (AUM) has grown to $335 million and Assets under Administration (AUA) has grown to $570 million for combined assets under care of approximately $905 million.
Post-closing of the Reactivation Transaction (assuming an aggregate of $4.0 million of gross proceeds is raised pursuant to the Subscription Receipt Financing and the Brokered Note Financing), NorRock will have approximately 33 million Class A Shares issued and outstanding. It is anticipated that the current shareholders of NorRock will collectively own approximately 15% of the issued and outstanding voting securities; the subscribers on the Subscription Receipt Financing and the Brokered Note Financing will collectively own approximately 48% of the issued and outstanding voting securities; and GTAC and Radar will each own approximately 6,280,000 Class A Shares, being approximately 18.5% of the issued and outstanding voting securities. As such, GTAC and Radar will each be an "insider" of NorRock for purposes of applicable securities laws.
GTAC is a private Ontario corporation of which Jacqueline Boddaert is the sole director and officer. Boddaert Family Trust owns 100% of GTAC and, including the Class A Shares owned by GTAC, will own directly or indirectly, approximately 22% of the issued and outstanding voting securities of NorRock. Radar, an Ontario limited partnership, is a private capital firm investing in late stage private companies. The president of Radar's general partner, Radar Capital Inc., is Mark Lerohl.
NorRock is working towards holding its shareholders' meeting approximately 60 days after obtaining regulatory approval for the Reactivation Transaction and completing the Reactivation Transaction by June 30, 2014.
For further information about NorRock's Reactivation Transaction, please contact Jacqueline Boddaert, CEO, at 416-479-9510 or by email at JBoddaert@norrock.ca.
For further information about HighView, please contact Mark Barnicutt, CEO, at 905-510-5183 or by email at firstname.lastname@example.org.
The information contained in this press release with resepct to NorRock, HighView and Radar was supplied by the parties respectively, for inclusion herein, and each party and its directors and officers have relied on the other parties for any information concerning the other parties.
Completion of the Reactivation Transaction is subject to a number of conditions, including Exchange acceptance and disinterested shareholder approval. The Reactivation Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Reactivation Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Management Information Circular to be prepared in connection with the Reactivation Transaction, any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon. Trading in the securities of NorRock should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction. Any securities referred to herein will not be registered under the U.S. Securities Act of 1933, as amended (the "1933 Act") and may not be offered or sold in the United States or to a "U.S. Person" (as such term is defined in Regulation S under the 1933 Act) in the absence of such registration or an exemption from the registration requirements of the 1933 Act.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements regarding a proposed private placement and a proposed Reactivation Transaction. Actual developments may differ materially from those contemplated by these statements depending upon, among other things, the ability of NorRock to raise the funds and decisions made by regulators, including the TSX Venture Exchange. The forward-looking statements contained in this press release represent NorRock's views and expectations as of the date of this release and should not be relied upon as representing its views and expectations at any subsequent date. The forward-looking events and circumstances discussed in this press release, including the completion of the proposed private placement and the proposed Reactivation Transaction, may not occur or could differ materially as a result of known and unknown risk factors and uncertainties affecting NorRock, including (without limitation) risks regarding the wealth management industry, market conditions, economic factors, and the equity markets generally. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and NorRock undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.