CRWN.TO - Crown Capital Partners

[sculpin]

CRWN - CROWN CAPITAL PARTNERS INC - Company Website http://www.crowncapital.ca

Wed 24 Jun 14:25:15 EDT - Trade times are ET. News times are ET. Bid/ask/vol sizes in thousands.

Sym-X   Bid - Ask   Last   Chg   %   Vol   $Vol   #Tr   Open-Hi-Lo   Year Hi-Lo   Last Trade   News   Delay
CRWN - T   0.2   3.56 · 3.65   0.2   3.60         14.1   51   13   3.60  3.65  3.60   8.53  3.49   14:00:26   Jun 15   realtime

I have been buying some of the convertible debt (low $70’s) & equity ($3.60) in Crown Capital CRWN (TSX) this week. Book is currently over $10 but I would expect it to drop due to loan impairments in the current environment – Current share price is probably way overdone to the downside though. Management is large holders of shares.

In May they suspended their dividend to conserve capital that they say will be used to deploy into their strategy and repurchase shares. There has been some insider buying at these levels. This Company would be a great candidate to be taken private or purchased by a larger player in the mezzanine, private debt market. Latest research from May…

CROWN CAPITAL PARTNERS INC. (TSX: CRWN) 12-Month Target: $8.25
Last Close: $4.15 Recommendation: BUY
SPECIAL SITUATIONS RESEARCH Implied Total Return: 98.8%
COMPANY DESCRIPTION: Crown Capital Partners Inc. (“Crown”, the “Company”, or “CRWN”) is a specialty finance company which provides
tailored capital solutions, with minimal or no ownership dilution, to middle-market companies. In addition, management is currently working
on Income Streaming Initiatives (power).

May 6, 2020
Event. Q1/20 Results, Strategic Update, Dividend Suspension.
Highlights.
▪ Revenue for the quarter of $6.4M came in below our
estimate of $9.8M and the street at $11.5M
▪ Net loss of $1.2M for the quarter was below our estimate
of $1.7M of earnings which was driven by a net unrealized
loss on investments of $3.6M.
▪ Total assets increased to $338M at quarter end from
~$300M at the end of 2019 as a result of the previously
announced new loans completed during the quarter to
Centric Health and CCI wireless.
COVID-19 Impact.
▪ Management expects most companies in the portfolio to
be impacted to some degree while the analysis of the
impact is ongoing.
▪ The portfolio is currently highlighted as stable, and CRWN
does not expect any failures at this time.
▪ Interest payments have been steady to date.
▪ Energy exposure is focused on natural gas.
Dividend Suspension and Business Repositioning.
▪ In light of the current market environment, CRWN is
accelerating a repositioning of the company/balance sheet
to focus on:

 Development of revenue sources where CRWN can be
a direct investor and asset manager of capital pools
such as the distributed power opportunity.

 Increased focus on capital light business through a
decreased position in the Crown Partners Fund toward
a target of 20% or less from the current 39%.
▪ In order to maximize funds available for the repositioning
of the business and share buybacks CRWN is suspending
dividends for the time being (likely 9-12 months).
Outlook.
▪ Management highlights the fact that economic crisis has in
the past created opportunity for alternative finance
providers which they hope to capitalize on.
[/i]

[sculpin]

un 5/20   Jun 4/20   Brussa, John Albert   Indirect Ownership   Common Shares   10 - Acquisition in the public market   15,000   $3.60
Jun 3/20   Jun 3/20   Brussa, John Albert   Indirect Ownership   Common Shares   10 - Acquisition in the public market   5,000   $3.60
Jun 3/20   Jun 3/20   Brussa, John Albert   Direct Ownership   Common Shares   10 - Acquisition in the public market   20,000   $3.60

[Philbert77]

the debentures seem interesting.

[samaniv]

Sculpin - I am an owner as well.

It's hard for me to imagine a scenario in which the debentures aren't worth $100. The leverage they employ is very modest.

But the upside on the equity seems immense. The biggest risk is a surge of defaults. It doesn't seem likely, but always hard to tell how conservatively the loan book is underwritten. Management has a good track record though. 

[sculpin]

Financial statements break out their loans, assets & funds managed….

https://crowncapital.ca/investor-relations/

Founded in 2000, Crown Capital Partners has been providing growth capital to established mid-market businesses. Over this period, Crown has achieved a cumulative gross IRR of 14%+ investing across numerous economic cycles. Crown’s Corporate, Distributed Power and Broadband Networking platforms each provide investors with diversified and reliable income streams not correlated to the public markets.

[sculpin]

Book value now at $9.14 while shares trading at $4.50. Investment write-downs thru Covid not as bad as expected.
Became more active on issuer bid in Q3...

Consistent with Crown's plan to rationalize its capital structure, the company acquired and cancelled 154,400 shares in the third quarter and 193,098 in the fiscal year to date under its normal course issuer bid.

Continued to grow their distributed power & network services businesses...

Total assets increased to $325.5-million at quarter-end, compared with $299.7-million at Dec. 31, 2019

[Simba]

Never heard of Crown Capital Partners, but high level thoughts on investing in an asset manager

-> Most AM trade at a discount to BV in Canada (I believe Onex is a good example of that if I'm not mistaken, Home Capital has traded at discount to book as well) -> So kind of why buy this when I can buy Onex or Home Capital (I know I know different assets). Heck I'm sure Wells Fargo is below book value too.
-> Becareful of taking "book value" to face value, these are illiquid assets without a market price. IFRS (not specific to Crown Capital) in valuing alternative assets. I'm sure market value is lower than book value (could be wrong)
-> What's their loan losses looking like? How much cyclical exposure do they really have? If your buying a book of business which is about to go full NPL tilt .. no good   
-> Lots of management turnover risk with these type of businesses (e.g. the business does not run itself so don't think these companies should trade that high versus something like a more $ money making machine like CI Investments)