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Callidus shares rise on deal to take troubled lender private

Credit: REUTERS/CHRIS HELGREN

Shares of Callidus Capital Corp surged more than 75% on Friday after the Canadian lender said its second-largest shareholder, Braslyn Ltd, would acquire its outstanding minority shares and take it private.

By Lawrence Delevingne

NEW YORK, Aug 16 (Reuters) - Shares of Callidus Capital Corp CBL.TO surged more than 75% on Friday after the Canadian lender said its second-largest shareholder, Braslyn Ltd, would acquire its outstanding minority shares and take it private.

Callidus, majority owned by Newton Glassman's Catalyst Capital Group Inc, said on Thursday that Braslyn was offering 75 Canadian cents for each share not held by Catalyst, pushing the stock to 72 Canadian cents per share.

Callidus, which makes loans to distressed energy, industrial and other companies, has lost money in recent years as some businesses have failed to repay or turn around as hoped. Callidus lost C$104 million in the first six months of 2019, according to its latest earnings report.

The deal with Braslyn comes with a C$2 million termination fee, a cut of future asset sales and other financial incentives. Callidus said that Blair Franklin Valuation, which advised on the deal, said the value of its common shares would be "negative" without the provisions in the transaction.

Braslyn, UK billionaire Joe Lewis' investment company, proposed to buy out the same stake for C$2 per share last year. It had a 14.5% stake in Callidus as of May 31, making it Callidus' largest outside shareholder.

Representatives for Braslyn and Lewis' Tavistock Group did not respond to requests for comment.

The Braslyn deal is the culmination of a difficult sales effort.

Callidus has long been a core holding for Glassman's Catalyst, one of Canada's best-known private equity firms. Catalyst took Callidus public in 2014 at C$14 a share and long hoped to cash in on the distressed lending business.

The stock peaked after Callidus' initial public offering at around C$21 a share in August and September 2014. It rebounded after falling in 2015 on negative research, and Callidus said in 2016 it had hired Goldman, Sachs & Co to handle a privatization process expected to be completed by June 2017.

When no buyer materialized, Callidus reiterated that Catalyst remained committed to a sale at C$18 to C$22 per share. But the price slumped into penny stock territory on short seller attacks, poor financial results and negative press reports.

A March 2018 Reuters Special Report about Catalyst and the value of its portfolio said Callidus was one of several holdings that Glassman's firm had struggled to sell. (reut.rs/2Jh1Wjq)

At the time, David Moore, a lawyer for Callidus and Catalyst, disputed that Catalyst overvalued assets or had trouble selling them.

A spokesman for Catalyst declined further comment on Friday. He also declined to comment on questions about the new transaction and its impact on Catalyst clients, which was unclear.

Catalyst's website says it has raised five funds with $4.3 billion in capital commitments. Catalyst investors include endowment funds for the University of Michigan, McGill University and the University of Toronto, public-employee pension funds in Montana and New Jersey, and major philanthropies such as the Rockefeller Foundation.

Special Report: A private equity star's picks shine ... until cash-out timehttps://www.reuters.com/investigates/special-report/canada-catalyst/

(Reporting by Lawrence Delevingne in New York; Additional reporting by Debroop Roy in Bangalore; Editing by Richard Chang)

((Lawrence.Delevingne@thomsonreuters.com; +1 646-223-5362; Reuters Messaging: lawrence.delevingne.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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