VANCOUVER, BRITISH COLUMBIA--(Marketwired - Oct. 1, 2013) - Matrix Asset Management Inc. (TSX:MTA) ("Matrix" or the "Company") and its subsidiary, GrowthWorks WV Management Ltd. ("GWWV"), announced today that the GrowthWorks Canadian Fund Ltd. ("Canadian Fund") has obtained an order for creditor protection under the Companies' Creditors Arrangement Act ("CCAA") and delivered notice to GWWV purporting to terminate the Management Agreement between Canadian Fund and GWWV (the "Management Agreement"), effective immediately. The termination notice was delivered prior to Canadian Fund obtaining the order for a court-supervised process under the CCAA. In Canadian Fund's CCAA filing, GWWV and GrowthWorks Capital Ltd. ("GWC") were named as "critical suppliers" of services to Canadian Fund. GWWV and GWC's status as critical suppliers and the terms on which GWWV and/or GWC would provide any services to Canadian Fund will be reviewed at a subsequent court hearing.
Neither Matrix nor GWWV had prior notice of Canadian Fund's intention to deliver a termination notice. Matrix and GWWV strongly disagree with Canadian Fund's position. While the Management Agreement contemplates that all disputes between Canadian Fund and GWWV are to be referred to binding arbitration, the CCAA order secured by Canadian Fund may limit GWWV's ability to pursue binding arbitration with respect to the termination of the Management Agreement and any other matters in dispute. The termination of the Management Agreement would have a material adverse effect on Matrix's operating revenues and results of operations.
Canadian Fund has reserved the right to claim damages in respect of any breaches of the Management Agreement by GWWV. There can be no assurance as to the outcome of claims made by Canadian Fund with respect to such breaches, if any, or by GWWV with respect to what Matrix believes is a wrongful termination of the Management Agreement. Further, there can be no assurance as to the outcome of the CCAA proceedings initiated by Canadian Fund and the impact of such proceedings on the Management Agreement and GWWV's ability to pursue and, if successful, recover amounts that GWWV may otherwise be entitled to.
GrowthWorks Capital Obtains $5 million Debt Financing
Matrix also announced today that it has entered into financing arrangements for loan financing of up to $5 million (the "Debt") with an independent Canadian lender (the "Lender"). This loan facility repays and replaces the loan facility between the Lender and Matrix announced on August 8, 2013. The Debt is to be advanced over two tranches of $4 million and $1 million. The first tranche has been advanced to GWC. The remaining tranche will be advanced to GWC, at its option, upon satisfactory due diligence by the Lender at the time of advance. The right to a second tranche will terminate on December 31, 2013.
The Debt is secured by the assets of GWC, a guarantee from and a charge over the assets of Matrix and certain of its non-registrant subsidiaries and a secured guarantee from David Levi, President of Matrix. The Debt shall be repaid over 60 months from the date of the advance of each tranche. The Debt bears interest at a rate of 12% annually, payable quarterly. An annual processing fee of 6.5% of the principal amount of the Debt will also be payable quarterly. An initial structuring fee of 3.5% of the principal of the Debt advanced is also payable to the Lender, less the amount previously paid by Matrix to the Lender. The Lender would also be entitled to receive up to 10% of incentive participation payments, if any, received by GWC or any affiliate of GWC in respect of managed venture capital portfolio assets, excluding up to 25% of the payments which may be distributed by GWC or its affiliates to employees as bonuses. Any unpaid balance of the Debt may be prepaid after 40% of the Debt has been repaid.