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Chesswood Reduces Team by 31; Management Cuts Its Salaries by 20%

April 22, 2020, 07:30 AM

Chesswood Group Limited, has taken steps for the benefit of its businesses, based on what is known today and recognizing that it is in a rapidly changing environment:

  • Reduced its team by 31, to 119 from 150 team members;
  • Management throughout Chesswood has taken a 20 percent reduction in salary;
  • Chesswood Directors' compensation has been suspended;
  • Underwriting standards have been raised considerably, resulting in very modest new business flow; and
  • Redeployed administrative and other staff to support customer service and collections teams, while they provide continued support to its customers.

The company also announced a temporary change in its monthly dividend from seven cents ($0.07) per share to three and a half cents ($0.035) per share, effective for April's dividend, to be paid on May 15.

"In these unprecedented times, we are temporarily reducing our dividend, in anticipation of the effects of COVID-19 on the performance of Chesswood's portfolios" said Barry Shafran, Chesswood's President and CEO. "Our Board will make decisions about future dividends during this extraordinary period on a monthly basis as the effects of COVID-19 emerge and management and the Board can assess their impact.”

COVID-19 Update

The company said it continues to monitor and assess the impact of COVID-19 in order to protect the health and safety of its employees and communities and to better understand and address the anticipated effects on its businesses. Steps already taken for the protection of its teams include:

All staff are working in a fully remote work environment in Canada and the U.S.
Suspension of all gatherings, events and air travel
Self-isolating any employee that has returned from travel abroad, become ill or has been in contact with someone demonstrating symptoms
Expansion of its technology to facilitate more effective communications in a remote work environment

What are Chesswood's Businesses Experiencing?

Like most in the industry, Chesswood’s businesses have been receiving and processing requests for temporary payment accommodations and deferrals from small and medium-sized small business customers in the U.S. and Canada. These are not forgiven payments. They are amounts that customers still have an obligation to pay. In general, we are initially providing one or two months of payment deferral to accommodate customers whose businesses may have been mandated to close or had other adverse impacts on their operations. These accommodations and deferred payments are generally being reflected in modifications to customer contracts which require that these payments are to be made up through a revised future payment schedule.

While it is too early to assess the ultimate impact of these payment accommodations and deferrals in terms of future credit losses, once businesses begin to reopen, the company expects to experience charge-offs in excess of pre-COVID levels for some number of months.

A large majority of customers continue to make their payments - to date Chesswood has only provided payment accommodations and deferrals to approximately 16 percent of its more than 30,000 customers - and requests for payment relief have begun to slow over the last week. In addition, some customers are making partial payments. Consistent with its service-driven approach, accommodations and deferrals are being granted on a one-on-one basis following communication with the customer about their specific business circumstances.

Its origination volumes today are modest in this uncertain environment. Transactions being funded are in industries that are believed to be less affected by COVID-19 or have excellent credit profiles and the ability to service their contractual obligation despite the pandemic.

Balance Sheet and Liquidity

Following its many treasury accomplishments in the fall of 2019, Chesswood enhanced its liquidity considerably while its leverage remains moderate. It has ample capacity today to fund new business, although in the short run it expects volumes to remain modest.

"In these most uncertain times we must be as nimble as possible while our collections and customer service teams work very hard to reach acceptable and helpful solutions for our customers seeking payment accommodation. We believe that our skills in collections and risk mitigation will help us manage effectively through these challenges" said Shafran.

Through three wholly owned subsidiaries in the U.S. and Canada, Chesswood Group Limited is North America's only publicly traded commercial equipment finance company focused on small and medium-sized businesses. Its Colorado-based Pawnee Leasing Corporation, founded in 1982, finances a highly diversified portfolio of commercial equipment leases and loans through relationships with over 600 independent brokers in the U.S. In Canada, Blue Chip Leasing Corporation has been originating and servicing commercial equipment leases and loans since 1996, and today operates through a nationwide network of more than 50 independent brokers. Located in Houston, TX, Tandem Finance Inc. provides equipment financing to small and medium-sized businesses in the U.S.

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