MCAN Mortgage Corporation Announces Rights Offering

Stock market symbol
TSX: MKP

TORONTO, June 3, 2015 /CNW/ - MCAN Mortgage Corporation ("MCAN", the "Company" or "we") announced today that the Company has filed a circular in respect of a rights offering (the "Offering") to raise maximum proceeds of $15,326,315.60. The Company has received final approval from its principal regulator, the Ontario Securities Commission. Subject to receipt of final approval from the securities commissions in each of the relevant offering jurisdictions and the Toronto Stock Exchange (the "TSX"), each holder of MCAN's common shares ("Common Shares") as of the close of business on June 16, 2015 (the "Record Date") will be issued one right (a "Right") for each Common Share held.  The combination of fifteen Rights and $10.90 (the "Exercise Price") will entitle a Rightsholder to subscribe for one Common Share at or before 4:00 pm (Toronto time) on July 10, 2015 (the "Expiry Time"). Rights not exercised at or before the Expiry Time will be void and will have no value. Rightsholders will be entitled to subscribe for additional Common Shares, if available, at the Exercise Price per share.  The Offering is of 21,091,274 Rights to subscribe for up to 1,406,084 common shares at a price of $10.90 per share.

As at May 20, 2015, MCAN's directors and officers held directly or indirectly 5,063,625 Common Shares. Certain of the directors and officers have indicated that they intend, subject to market conditions, to exercise directly or indirectly some or all of the Rights they receive under the Offering.

"We are pleased to announce a capital raise in the form of a rights offering", said William Jandrisits, MCAN's President and Chief Executive Officer.  "The rights issuance provides an attractive opportunity for shareholders to acquire MCAN stock at a 15% discount, while at the same time providing MCAN with a low cost of capital to further grow our corporate assets and core earnings.  We expect a significant level of participation from our existing shareholders which includes both current and former directors, officers and staff". 

The net proceeds of this Offering (assuming all Common Shares are subscribed for and after payment of the estimated expenses of $125,000) will be approximately $15,201,315.60. The completion of the Rights Offering is not conditional upon the Company receiving any minimum amount of subscriptions from shareholders. 

The intention of the Rights Offering is to raise capital to fund further growth of the Company's mortgage lending businesses in the normal course, consistent with the Company's stated business and objectives. The net proceeds raised through the Rights Offering will provide the Company with capital that qualifies as both regulatory and mortgage investment capital.  Accordingly, this capital will enable the Company to issue additional term deposits which, together with the net proceeds raised through the Rights Offering, will be used to fund further business opportunities through the origination of mortgages. The Company anticipates that the majority of the net proceeds raised through the Rights Offering will be used to fund mortgage origination opportunities in its single family residential lending business. The Company may also use net proceeds raised through the Rights Offering to originate mortgages in its other (that is, non-single family residential) mortgage lending businesses.

Further Information:  The Rights Circular will be filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com and on the Company's website at www.mcanmortgage.com.

MCAN is a public company listed on the Toronto Stock Exchange ("TSX") under the symbol MKP and is a reporting issuer in all provinces and territories in Canada.  MCAN also qualifies as a mortgage investment corporation ("MIC") under the Income Tax Act (Canada) (the "Tax Act").

MCAN's primary objective is to generate a reliable stream of income by investing its corporate funds in a portfolio of mortgages (including single family residential, residential construction, non-residential construction and commercial loans), as well as other types of financial investments, loans and real estate investments. MCAN employs leverage by issuing term deposits eligible for Canada Deposit Insurance Corporation ("CDIC") deposit insurance up to a maximum of five times capital (on a non-consolidated tax basis in the MIC entity) as permitted by the Tax Act.  The term deposits are sourced through a network of independent financial agents. As a MIC, MCAN is entitled to deduct from income for tax purposes 100% of dividends, except for capital gains dividends, which are deducted at 50%.  Such dividends are received by the shareholders as interest income and capital gains dividends, respectively.

MCAN's wholly-owned subsidiary, Xceed, focuses on the origination and sale to third party mortgage aggregators of residential first-charge mortgage products across Canada.  As such, Xceed operates primarily in one industry segment through its sales team and mortgage brokers.

MCAN also participates in the market MBS program and the CMB program.

A CAUTION ABOUT FORWARD-LOOKING INFORMATION AND STATEMENTS

This press release contains "forward-looking statements" within the meaning of applicable Canadian securities laws.  The words "may," "believe," "will," "anticipate," "expect," "planned," "estimate," "project," "future," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Such statements reflect management's current beliefs and are based on information currently available to management. The forward-looking statements in this press release include, among others, statements and assumptions with respect to:

• successful completion of the Offering
• the current business environment and outlook;
• possible or assumed future results;
• ability to create shareholder value;
• business goals and strategy;
• the stability of home prices;
• effect of challenging conditions on us;
• factors affecting our competitive position within the housing markets;
• sufficiency of our access to capital resources; and
• the timing of the effect of interest rate changes on our cash flows.

The material factors or assumptions that were identified and applied by us in drawing conclusions or making forecasts or projections set out in the forward-looking statements include, but are not limited to:

• the Company's ability to successfully implement and realize on its business goals and strategy;
• factors and assumptions regarding interest rates;
• housing sales and residential mortgage borrowing activities;
• the effect of competition;
• government regulation of the Company's business;
• computer failure or security breaches;
• future capital and funding requirements;
• the value of mortgage originations;
• the expected margin between interest earned on mortgage portfolios and interest paid on deposits;
• the relative continued health of real estate markets;
• acceptance of the Company's products in the marketplace;
• availability of key personnel;
• the Company's operating cost structure; and
• the current tax regime.

Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results to differ materially from the anticipated future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to:

• global market activity;
• worldwide demand for and related impact on commodity prices;
• changes in government and economic policy;
• changes in general economic, real estate and other conditions;
• changes in interest rates;
• changes in MBS spreads and swap rates;
• MBS and mortgage prepayment rates;
• mortgage rate and availability changes;
• adverse legislation or regulation;
• availability of CMB and MBS issuer allocation;
• technology changes;
• confidence levels of consumers;
• ability to raise capital and term deposits on favourable terms;
• our debt and leverage;
• competitive conditions in the homebuilding industry, including product and pricing pressures;
• ability to retain our executive officers and other employees;
• litigation risk;
• relationships with our mortgage originators;
• ability to realize anticipated benefits from the acquisition of Xceed; and
• additional risks and uncertainties, many of which are beyond our control, referred to in this press release and our other public filings with the applicable Canadian regulatory authorities.

Subject to applicable securities law requirements, we undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.  However, any further disclosures made on related subjects in subsequent reports should be consulted.

SOURCE MCAN Mortgage Corporation

For further information: MCAN Mortgage Corporation, Website: www.mcanmortgage.com, e-mail: [email protected], William Jandrisits, President and Chief Executive Officer, [phone]; Jeffrey Bouganim, Vice President and Chief Financial Officer, [phone]