PowerBand Solutions (TSXV: PBX) has signed a term sheet for a significant investment into both its Canadian and US-based operations as it progresses towards securing credit facilities for its finance and leasing platform. The investment, which is to be made directly into the subsidiaries of PowerBand, values the firms US subsidiary alone at over US$110 million.
The investment, which is to take the form of unsecured convertible debentures, is to come from that of Texas-based D&P Holdings and will directly into PowerBand’s wholly-owned PowerBand Solutions US subsidiary. The convertible debenture will amount to US$10 million, paid to PowerBand in a series of proposed tranches with the first tranche for $1.5 million set to occur in early March. The second tranche, for $3.5 million, will close thirty days following the initial tranche, and the third tranche for $5.0 million will occur thirty days thereafter.
The funding from such debentures is to be used to advance ongoing discussions that PowerBand is currently holding with lenders to secure credit facilities for its finance and leasing arm. Those facilities will then be made available to consumers upon closing, enabling the PowerBand platform to serve such financing and leasing functions for the end-consumer to enable them to acquire electric and non-electric vehicles.
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The lender, D&P Holdings, is one of the largest administrations within the United States for automotive warranty and insurance products and currently works with over 850 dealerships across all states. In conjunction with the financing, D&P will be granted exclusive global rights to act as administrator for new products being sold through PowerBand’s platform. This includes being administrator for all approved vehicle services contracts, warranty products, down payment protection, insurance products, and all ancillary products sold through the platform.
We believe this strategic investment into PowerBand will be a catalyst to allow PowerBand to secure the necessary credit facilities for its revolutionary transaction system. Powerband enables a vehicle lease to be approved in seconds, rather than days, as they have proven with Tesla. We think that, in itself, is revolutionary for everyone who acquires a car or truck. And we anticipate many other benefits that will disrupt and simplify how people buy and sell cars and trucks.
John Armstrong, CEO of D&P Holdings
Under the terms of the convertible debenture, D&P Holdings will see their US$10 million debentures mature after a period of three years, while bearing interest at a rate of 9% per annum. The investment will enable D&P to take a 9% equity claim in that of PowerBand US as well as PowerBand’s Canadian leasing division upon conversion. Under the agreement, D&P will also have the option to subscribe for an additional US$2.5 million, which will enable them to take an additional 21% equity stake in PowerBand’s Canadian leasing division.
The transaction is significant for PowerBand in that it places a strong valuation anchor on the firms operations. With D&P Holdings paying US$10 million for what is effectively a 9% stake in the firms operation with no dilution to shareholders, it values all of PowerBand’s US operations, as well as a portion of the Canadian operations at US$111.11 million.
Translated to Canadian dollars, PowerBand US has been ascribed a valuation of approximately $148.18 million. Deduct the ownership that would be attributed to D&P, and it places PowerBand Solutions theoretical value at approximately C$134.84 million should the term sheet close.
PowerBand Solutions last traded at $0.16 on the TSX Venture.
Valuation estimate calculation:
US$10.0 million (investment amount) / 0.09 (percent ownership acquired) = US$111.11 million
US$111.11 million * 1.33 (USD/CAD exchange rate) = C$148.18 million
C$148.18 million * 0.91 (PowerBand’s ownership in PowerBand US upon completion) = C$134.84 million
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