TORONTO, August 6, 2021 – Flow Capital Corp. (TSXV: FW) (“Flow Capital” or the “Company”) announces that it has completed a redemption of C$3.6 million (“Redemption Amount”) and has raised an additional US$2.8 million (“Investment Amount”), against the issuance of Class G Units (“Transaction”) in its Flow Priority Return Fund II LP (“LP II” or “Fund II”).
Under the Transaction, a collection of institutional and high net worth investors have subscribed for Class G senior units of Fund II. A majority of the existing LP investors opted to reinvest their share of the Redemption Amount and several also opted to top-up their investment. In exchange for the Investment Amount, the Company has granted to Fund II a royalty interest in 7 of the Company’s existing investments (the “Underlying Royalty Contracts”). Pursuant to the terms of Fund II, the Company is subscribing for such number of subordinated units as is equal to 25% of the capital raised in senior units issued in Fund II.
The Class G Senior Units rank pari passu to the existing Class A and Class F units and the senior units collectively earn an amount equal to the lesser of the (i) sum of 9.00% per month of the outstanding Investment Amount (the “Class A Return”) and 10% per month of the outstanding Investment Amount (the “Class F Return”) and 9.25% per month of the outstanding Investment Amount (the “Class G Return”) or (ii) royalty payments received by Flow Capital from the Underlying Royalty Contracts will be paid to investors (collectively, the “Preferred Return”).
Since its inception in October 2020, LP II has raised approximately C$19.2M of net new capital from the issuance of preferred units and has completed buyouts of Underlying Royalty Contracts in the amount of C$9.5M of which approximately $C3.6M has been redeemed and the balance has been rolled forward.
“The capital raised in this LP II will help Flow to continue to grow its portfolio of revenue-linked royalty and venture debt investments in high-growth companies,” said Alex Baluta, CEO of Flow Capital.
Flow Capital Charitable Foundation, a not-for-profit corporation the directors and officers of which are also directors and officers of the Company, participated in the Transaction and, as such, the Transaction may constitute a related party transaction under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Transaction is exempt from the formal valuation requirements of Section 5.4 of MI 61-101 by virtue of Section 5.5(b) of MI 61-101, and the minority shareholder approval requirements of Section 5.6 of MI 61-101 by virtue of Section 5.7(1)(a) of MI 61-101 on the basis that (i) no securities of the Company are listed or quoted on the specified markets, and (ii) at the time the Transaction was agreed to, neither the fair market value of, nor the fair market value of the consideration for, the units subscribed for by Flow Capital Charitable Foundation exceeded 25% of the Company’s market capitalization (as determined in accordance with MI 61-101).
No special committee was established by the Company in connection with the Transaction or the participation of Flow Capital Charitable Foundation in the Transaction, and no materially contrary view or abstention was expressed or made by any director of the Company in relation thereto. Further details will be included in a material change report that will be filed by the Company in connection with the completion of the Transaction. The Company did not file the material change report more than 21 days before the expected closing date of the Transaction as the details of the Transaction and the total amount to be invested by Flow Capital Charitable Foundation were not settled until shortly prior to the closing of the Transaction, and the Company wished to complete the Transaction on an expedited basis for sound business reasons.
This news release does not constitute an offer to sell, or a solicitation of an offer to buy, any of the securities referenced herein in the United States. The securities referenced herein 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.
About Flow Capital
Flow Capital Corp. is a diversified alternative asset investor and advisor, specializing in providing minimally dilutive capital to emerging growth businesses. To apply for financing, visit www.flowcap.com.
For further information, please contact:
Flow Capital Corp.
Alex Baluta
Chief Executive Officer
alex@flowcap.com
47 Colborne Street, Suite 303,
Toronto, Ontario M5E 1P8
Certain statements herein may be “forward-looking” statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Flow or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward-looking statements. These forward-looking statements reflect current assumptions and expectations regarding future events and operating performance and are made as of the date hereof and Flow assumes no obligation, except as required by law, to update any forward-looking statements to reflect new events or circumstances.
