Monthly Archives: August 2024

CALGARY, August 29, 2024 – Crown Capital Partners Inc. (“Crown” or the “Corporation”) (TSX: CRWN) today announced that it will seek the approval of the holders (the “Debentureholders”) of its 10% unsecured subordinated debentures of the Corporation due December 31, 2024 (the “Debentures”) for a resolution (the “Debentureholder Resolution”) at a special meeting of the Debentureholders to be held at the offices of the Corporation, 33 Yonge Street, Suite 901, Toronto, ON, M5E 1G4, on October 18, 2024 at 10:00 a.m. (Eastern Time) (the “Meeting”).

If approved by Debentureholders at the Meeting, the Debentureholder Resolution would:

1. authorize and approve certain amendments to the Corporation’s amended and restated trust indenture dated June 30, 2023 between the Corporation and TSX Trust Company (the “Indenture”) to: (i) extend the maturity date of the Debentures from December 31, 2024 to December 31, 2026; (ii) amend the interest rate on the Debentures from 10% to 11% effective a minimum of five trading days following the approval of the Debentureholder Resolution and from 11% to 12% effective as of December 31, 2025; and (iii) amend the interest payment dates from occurring semi-annually on June 30 and December 31 of each year to occurring annually on December 31 of each year, with the next payment to occur effective December 31, 2025 for the interest accrued on the Debentures from June 30, 2024 up to, but excluding, December 31, 2025; and

2. waive the default by the Corporation under the Indenture for the failure to make the interest payment on the Debentures (the “Deferred Interest Payment”) due on June 30, 2024 (the “Default Waiver”), subject to the requirement that the Corporation make the Deferred Interest Payment to Debentureholders within 60 days of the approval of Debentureholder Resolution (the “Deferred Interest Payment Deadline”). The Deferred Interest Payment will be made to Debentureholders holding Debentures as of a record date to be set by the Corporation following the Meeting. In the event that the Deferred Interest Payment is not made by the Deferred Interest Payment Deadline, the Default Waiver will be of no further force or effect.

The board of directors of the Corporation believe that the Debenture Amendments and Default Waiver provide the following advantages:

1. Payment of Deferred Interest Payment: The Corporation believes that the extension of the maturity date will allow it to be in a better position to pay the Deferred Interest Payment to the Debentureholders by the Deferred Interest Payment Deadline.

2. Extension of Maturity Date: The extension of the maturity date will afford Debentureholders a longer period of time during which to receive interest at a favourable rate and will provide the Corporation with additional time to fund the repayment of the Debentures from the proceeds of asset sales or otherwise.

3. Increased Interest Rate: Increasing the interest rate from 10% to 11% effective a minimum of five trading days following the approval of the Debentureholder Resolution and from 11% to 12% effective December 31, 2025 provides a more attractive yield to Debentureholders.

4. Consent Fee: Any Debentureholder that votes for the Debenture Amendments will receive a cash consent fee (the “Consent Fee”) of $10 per $1,000 principal amount of Debentures held by that Debentureholder as of September 5, 2024 (the “Record Date”) provided that certain other conditions required for the payment of the Consent Fee are satisfied, including the Debenture Amendments are validly approved by Debentureholders and the Toronto Stock Exchange (the “TSX”).

Prior to the Deferred Interest Payment Deadline, provided that the Debentureholder Resolution is approved, the Corporation intends to undertake a private placement financing in order to obtain the funds to make the Deferred Interest Payment. There can be no assurance that such private placement financing will be completed by the Corporation prior to the Deferred Interest Payment Deadline.

The effective date of the Debenture Amendments will be a minimum of five trading days following the approval of the Debentureholder Resolution. Further particulars of the expected benefits of the Debenture Amendments and Default Waiver will be described in the management information circular of the Corporation relating to the Meeting (the “Circular”), which will be available under the Corporation’s profile on SEDAR+ at www.sedarplus.ca and which will be mailed to Debentureholders in the coming weeks.

The Debentureholder Resolution will only be effective if passed by an extraordinary resolution of the holders of at least 66 ⅔% of the principal amount of the Debentures present in person or by proxy at the Meeting and entitled to vote in respect of the Debentureholder Resolution.

Debentureholders may vote on or before 10:00 a.m. (Eastern Time) on October 16, 2024 by following the voting instructions set out in the Circular. Only Debentureholders of record at the close of business on the Record Date will be entitled to vote at the Meeting.

About Crown Capital Partners (TSX:CRWN)

Founded in 2000 within Crown Life Insurance Company, Crown Capital Partners is a capital partner to entrepreneurs and growth businesses mainly operating in the telecommunications infrastructure, distribution services, and distributed power markets. We focus on growth industries that require a specialized capital partner, and we aim to create long-term value by acting as both a direct investor in operating businesses serving these markets and as a manager of investment funds for institutional partners. For additional information, please visit crowncapital.ca.

FORWARD-LOOKING STATEMENTS

This news release contains certain “forward looking statements” and certain “forward looking information” as defined under applicable Canadian and U.S. securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “continue”, “plans” or similar terminology. Forward-looking statements in this news release include, but are not limited to, statements, management’s beliefs, expectations or intentions regarding the Debenture Amendments, the Default Waiver, the anticipated payment of the Deferred Interest Payment, the consequences of the Debentureholder Resolution not being approved by Debentureholders, the timing and value of potential asset sales, and management’s intended uses of the proceeds of asset sales. Forward-looking statements are based on forecasts of future results, estimates of amounts not yet determinable and assumptions that while believed by management to be reasonable, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Forward-looking statements are subject to various risks and uncertainties concerning the specific factors identified in the Crown’s periodic filings with Canadian securities regulators. See Crown’s most recent annual information form for a detailed discussion of the risk factors affecting Crown. In addition, Crown’s dividend policy will be reviewed from time to time in the context of the Corporation’s earnings, financial requirements for its operations, and other relevant factors and the declaration of a dividend will always be at the discretion of the board of directors of the Corporation. Crown undertakes no obligation to update forwardlooking information except as required by applicable law. Such forward-looking information represents management’s best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.

For further information, please contact:

Michael Overvelde Chief Financial Officer michael.overvelde@crowncapital.ca (416) 640-6887

CALGARY, August 8, 2024 – Crown Capital Partners Inc. (“Crown” or the “Corporation”) (TSX: CRWN) today announced its financial results for the three and six months ended June 30, 2024. Crown’s complete financial statements and management’s discussion and analysis are available on SEDAR at www.sedarplus.ca.

Q2 2024 Financial & Operating Highlights

• Crown recognized a net loss of $(15.2) million ($2.71 loss per basic share) in Q2 2024 compared to a net loss of $(1.2) million ($0.21 loss per basic share) in Q2 2023.
•  Adjusted EBITDA1 was $2.0 million in Q2 2024 compared to $2.6 million in Q2 2023 due primarily to reductions in revenues from the Network Services and Distributed Power segments and a reduction in income distributions from Crown Partners Fund, partially offset by increased earnings from the Distribution Services and Real Estate segments.
• Distribution services revenue was $9.4 million in Q2 2024 compared to $8.9 million in Q2 2023. This segment reported net income before income taxes of $0.3 million (Q2 2023 – net loss before income taxes of $(1.2) million), with the improvement attributable to the impact of operational efficiencies implemented throughout 2023 and 2024 and increased capacity utilization across the warehouses. Capacity utilization was 58% at June 30, 2024 compared with 52% at March 31, 2024 and 42% at December 31, 2023.
• Network services revenue was $5.9 million in Q2 2024 compared to $6.4 million in Q2 2023, with the decrease due primarily to the continued runoff of customer contracts from WireIE and the conclusion of a large construction-sector contract in mid-Q2 2023, partially offset by modest growth from customers of Galaxy in the mining sector. This segment reported a net loss before income taxes of $(0.4) million (Q2 2023 – net income before income taxes of $0.5 million).
• Real Estate segment revenue was $1.2 million in Q2 2024 compared to $0.9 million in Q2 2023, with the increase over the prior-year quarter attributable to property development contracts acquired during Q2 2024. This segment recorded net income before income taxes of $0.3 million (Q2 2023 – net loss before income taxes of $0.2 million).
• Distributed Power revenue was $0.4 million in Q2 2024 compared to $0.6 million in Q2 2023, with the decrease primarily relating to a decrease in property and equipment under development and to the consolidation of the Wilson Creek assets. This segment reported a net loss before income taxes of $(0.2) million (Q2 2023 – net income before income taxes of $0.2 million).
• The Specialty Finance segment recorded a net loss before income taxes of $(13.6) million (Q2 2023 – net income earnings of $0.8 million), representing Crown’s share of (losses) earnings of Crown Partners Fund. In Q2 2024, Crown Partners Fund incurred a decrease in net assets of $42.2 million, of which $34.2 million was attributable to limited partnership interests, of which we own 28%, and $8.0 million was attributable to Crown’s general partnership interest. The decline from the prior-year quarter is due primarily to an unrealized loss recognized in the period in respect of a loan investment carried at fair value through profit or loss.
• Total equity at quarter-end decreased to $22.4 million, from $38.2 million at the end of 2023, due to a net loss attributable to shareholders of $(15.9) million, driven primarily by Crown’s share of the loss of Crown Partners Fund of $15.4 million. Total equity per share decreased to $4.00 per basic share from $6.84 per basic share as at December 31, 2023.
• Since September 30, 2023, Crown has not satisfied certain financial covenant clauses of its credit agreement with its bank. Accordingly, the bank is contractually entitled to request immediate repayment of the outstanding loan in the amount as of August 8, 2024 of $24.4 million and the outstanding balance is presented as a current liability as at June 30, 2024. The Corporation’s bank has not requested early repayment of the loan. Management is currently in discussions with lenders regarding replacing its current credit facility and multiple financing options are being considered; however, there is no assurance that such arrangements will become available.
• As of August 8, 2024, the Corporation had not paid the scheduled interest payment of $1.0 million due on June 30, 2024 in respect of the 10% unsecured subordinated debentures (“Debentures”). Since July 31,2024, this has constituted an event of default under the terms of the trust indenture that governs the Debentures. Accordingly, the Debenture holders, subject to certain conditions, are contractually entitled to request immediate repayment of the outstanding balance of $21.0 million, including principal and interest, but have not requested immediate repayment. Management is currently evaluating options to address thenon-payment of interest on the Debentures.
• As of August 8, 2024, the Corporation had not paid the scheduled interest payment of $0.04 million due on June 30, 2024 in respect of the 10% redeemable secured subordinated debentures (“Subordinated Debentures”). This constitutes an event of default, but the holders of the Subordinated Debentures have not requested immediate repayment.
• In Q2 2024, Crown’s subsidiary, Community Network Partners, completed the second sublot related to its fibre network under the Province of Ontario’s Accelerated High-Speed Internet Program and $20.3 million is included in accounts receivable with the grant funding expected to be received in Q3 2024.

“Q2 was very disappointing as an unrealized loss on a single loan resulted in a significant reduction in the carrying value of our limited partnership interest in Crown Partners Fund and the reversal of Crown’s previously-accrued performance fee entitlement. The loss relates to a company that had been very successful when the loan was underwritten in 2019, but which has since experienced operational difficulties. The company is currently in a sales process. We are hopeful that the ultimate recovery will exceed the current carrying value. Crown Partners Fund is currently being liquidated, and no new investments have been made since 2020,” said Chris Johnson, President and CEO of Crown.

“On the go-forward business front, we continue to make good progress with our Telecom, Distribution and Real Estate platforms with all business units exceeding expectations for the first half of the year. We expect the earnings from these businesses to continue to increase over the next 12 months and be the primary sources of our earnings in 2025,” added Mr. Johnson.

Q2 2024 Financial Results Summary

About Crown Capital Partners (TSX:CRWN)

Founded in 2000 within Crown Life Insurance Company, Crown Capital Partners is a capital partner to entrepreneurs and growth businesses mainly operating in the telecommunications infrastructure, distribution services, and distributed power markets. We focus on growth industries that require a specialized capital partner, and we aim to create long-term value by acting as both a direct investor in operating businesses serving these markets and as a manager of investment funds for institutional partners. For additional information, please visit crowncapital.ca.

FORWARD-LOOKING STATEMENTS

This news release contains certain “forward looking statements” and certain “forward looking information” as defined under applicable Canadian and U.S. securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “continue”, “plans” or similar terminology. Forward-looking statements in this news release include, but are not limited to, statements, management’s beliefs, expectations or intentions regarding the distribution services market, the network services market and the general economy, Crown’s business plans and strategy, including anticipated investment dispositions and capital deployments and the timing thereof, anticipated refinancing activity and Crown’s future earnings. Forward-looking statements are based on forecasts of future results, estimates of amounts not yet determinable and assumptions that while believed by management to be reasonable, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Forward-looking statements are subject to various risks and uncertainties concerning the specific factors identified in the Crown’s periodic filings with Canadian securities regulators. See Crown’s most recent annual information form for a detailed discussion of the risk factors affecting Crown. In addition, Crown’s dividend policy will be reviewed from time to time in the context of the Corporation’s earnings, financial requirements for its operations, and other relevant factors and the declaration of a dividend will always be at the discretion of the board of directors of the Corporation. Crown undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents management’s best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.

For further information, please contact:

Michael Overvelde Chief Financial Officer investor.relations@crowncapital.ca (416) 640-6887