Axis Auto Finance provided a wide-ranging shareholder update this week, including that the subprime automotive finance company closed on a $6.25 million term loan with a Schedule 1 bank.
From the onset of the pandemic and the government-mandated measures to combat the spread of the coronavirus, Axis said it has supported borrowers through payment accommodations or deferrals. To date, the company reported 12.5% of active customer accounts have been impacted.
The frequency of payment deferral requests declined significantly by the end of April, according to a news release Axis distributed this week.
While originations continued through the lockdown period, Axis explained that the finance company adjusted its underwriting approach to account for the difficult economic environment.
“With automotive dealership showrooms largely closed across the country, origination volumes were low through the last two months,” the company said. “With the re-opening of dealerships in several provinces, Axis is seeing a significant increase in weekly application volume since mid-May.”
Axis highlighted that management implemented necessary precautions to protect the well-being of its employees and customers, including:
• Switched to a fully remote work model
• Intensified cleaning and hygiene practices
• Suspended all in-person meetings and corporate travel
• Implemented social distancing protocols across the organization
• Suspended repossessions to not create further financial burden for affected customers
The finance company mentioned additional steps were taken to preserve liquidity, including cuts and/or deferrals of senior management compensation, employee layoffs, suspension of director fees and vendor supported payment deferrals. The company said these steps allowed Axis to retain a strong liquidity position to date and position the company for a smooth return to normal operations upon the lifting of government restrictions.
Meanwhile, Axis noted that its senior secured credit facility, which matured in March has been extended through July in light of the pandemic, is positioned with the intention to go through an orderly renewal process at that time. The company said it is in compliance with all terms and covenants of that facility as of the date hereof.
In addition, Axis has closed on a $6.25 million term loan. Together with unused amounts on its securitization facilities, Axis computed that it currently has more than $40 million in available growth capital.
Axis indicated that a $6.25 million term loan is backed by the Canadian Government under the Business Credit Availability Program (BCAP). Specifically, 80% of the principal of the loan is guaranteed by Export Development Canada (EDC).
Axis said the Loan bears interest at a rate of 4.00% per annum above the bank’s prime lending rate. Axis will also pay an EDC Guarantee fee of 1.8% annually of the loan amount.
The initial term of the loan is 12 months, but Axis said it may provide the bank with a written request to extend the loan maturity date by an additional 12 months no more than 90 days prior to the initial loan maturity date.
Under the terms of BCAP, Axis explained the proceeds of the loan may not be used to refinance existing debt obligations, for non-scheduled term debt repayment, any shareholder contributions, repayment of shareholder loans, stock buy-backs, executive bonuses or increase in executive compensation while any balance of the loan is outstanding and the EDC Guarantee is in place.