Axis Enters Into Asset Purchase Agreement for Sale of Auto Finance Business

For further information:

Axis Auto Finance Inc.
Todd Hudson
CEO
(416) 633-5626
ir@axisautofinance.com

Axis Auto Finance Inc. (“Axis” or the “Company”) (TSX: AXIS), is pleased to announce that further to its press releases dated August 20, 2024 and May 15, 2024, the Comp any and its operating subsidiaries involved in the Company's auto finance business have entered into an asset purchase agreement with Fionic Canada Ltd. ("Fionic") and an affiliate of Fionic in respect of their acquisition of the auto loan assets and undertaking of Axis through the acquisition of certain assets and assumption of certain liabilities of Axis and it subsidiaries relating to the Company's auto finance business. The base purchase price for the assets is approximately $114,000,000 (subject to adjustments for changes in the composition of the auto loans assets and fair market value of inventory since December 31, 2023). Fionic is an arm's length party to Axis and its affiliates and the transaction was negotiated on an arm's length basis.

The Company intends to mail a management information circular ("Circular") to shareholders in connection with a shareholders meeting to be held in connection with the approval of the proposed transaction in the coming weeks and expects to hold a meeting of shareholders in late November. Additional details regarding the terms and conditions of the transaction as well as the rationale for the approvals made by the Special Committee and the Board will be set out in the Circular which, together with the asset purchase agreement, will be available under the Company's SEDAR+ profile at www.sedarplus.ca.

Special Committee and Board Approval

The Company formed a special committee led by Wes Neichenbauer and composed of two other independent directors of the Company to assist with the Company's strategic review and the review of the proposed transaction. After receiving a fairness opinion from Evans & Evans, Inc. ("Evans & Evans"), with respect to the consideration being received in respect of the proposed transaction, the Special Committee unanimously recommended that the board of directors of the Company (the "Board") approve the proposed transaction. After receiving the fairness opinion from Evans & Evans, legal and financial advice, the recommendation of the Special Committee and after taking into account the alternatives available to the Company, the Board unanimously determined that the proposed transaction is in the best interests of the Company and is fair to the Company's securityholders.

Shareholder and Debenture Holder Approval

Given that the proposed transaction involves the sale of all or substantially all of the Company's assets, the transaction will require the approval of two-thirds of votes cast by shareholders of the Company at a meeting expected to be held in early December. In connection with the execution of the agreement Axis has obtained voting support agreements from the holders of approximately 47% of the Company's outstanding shares pursuant to which they have agreed, subject to the terms thereof, to vote in favour of the proposed transaction.

In addition, as a condition to the closing of the transaction the Company has obtained the approval of the requisite majority of the holders of its outstanding debentures to revise the terms of such debentures to provide for a redemption right that will allow the Company to redeem the outstanding debentures (if the proposed transaction closes on or before December 31, 2024) in exchange for a payment equal to the outstanding interest owing up to the redemption date and further payments against principal of between 80-85% percent of the principal amount thereof. The debentures at issue are both the unsecured subordinated debentures issued on September 11, 2023 (the "September 2023 Debentures") and the 7.5% Extendible Unsecured Convertible Subordinated Debentures issued in April 2018 (the "April 2018 Debentures").

At present it is not anticipated that there will be any assets remaining for shareholders following the repayment of amounts owing to the Company's creditors and it is expected that the Company's common shares will be delisted from the Toronto Stock Exchange shortly following the closing.

Fairness Opinion

The Special Committee retained Evans & Evans to provide a fairness opinion with respect to the fairness of the proposed transaction from a financial standpoint to Axis and the shareholders of Axis. Evans & Evans provided an opinion that, based upon and subject to the assumptions, limitations and qualifications contained in Evans & Evans' written fairness opinion, the purchase price is fair, from a financial point of view to the Axis shareholders. The fairness opinion will be included in the Circular.

Related Party Transaction

Approximately $3,292,000 principal amount of debentures are held by certain officers and directors of the Company or their affiliates. Specifically $1,572,000 principal amount of the April 2018 Debentures are held by related parties (being $1,068,000 held by affiliates of Wes Neichenbauer and $504,000 held by affiliates of Todd Hudson) and $1,720,000 principal amount of the September 2023 Debentures are held by related parties (being $1,320,000 held by affiliates of Ian Anderson and Paul Kerwin, $200,000 held by affiliates of Wes Neichenbauer, $100,000 held by Ilja Troitschanski and $100,000 held by Todd Hudson). Those related parties who are also directors of the Company recused themselves from voting on the approval of the amendments to the terms of the debentures. The above referenced amendments to the April 2018 and September 2023 Debentures may be considered to be related party transactions for the purposes of National Instrument 61-101 – Protection of Minority Security Holders in Special Transactions and the Company will rely on the exemptions from the valuation and minority approval requirements contained in Sections 5.5(g) and 5.7(1)(e) of National Instrument 61-101 (financial hardship), respectively.

Credit Agreement Update

Although the Company has not received a formal waiver of the covenant breaches under its senior credit facility past October 1, 2024, the Company has received confirmation from its funding syndicate that they are supportive of the proposed transaction. The Company continues to work with its funders under the senior credit facility to obtain a formal waiver that will extend to a date that will permit the closing of the proposed transaction. One of funders in the senior credit facility funding syndicate independently holds the Master Loan Program Agreement (“MLPA”) funding facility, which was also in covenant breach at the time the Company reported its 2024 fiscal year end financial results on September 27, 2024, and this continues to be the case. The Company has received confirmation from its MLPA funding partner that they are supportive of the proposed transaction and continues to work with this funding partner to obtain a formal waiver of the breach, that will permit the closing of the proposed transaction. The Company will provide a further update if and when formal waivers are obtained.

About Axis Auto Finance

Axis is a fintech lender providing alternative used vehicle financing options to non-prime borrowers. Axis loans are offered through automotive dealers to approximately 30% of Canadians (Source: Equifax) that have credit scores in the non-prime range. All Axis auto loans report to the credit bureau, resulting in over 70% of customers seeing a significant improvement of their credit scores. Further information on the Company can be found at https://www.axisfinancegroup.com/investors-press-releases/.

The TSX Exchange has neither approved nor disapproved the contents of this press release. Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.

Notice Regarding Forward-Looking Statements

This news release contains forward-looking information and forward-looking statements (collectively, "forward-looking statements") within the meaning of applicable securities laws, regarding the Company's business and operations. In this news release, forward-looking statements relate to, among other things, information regarding: (a) the terms and conditions of the proposed asset sale transaction; (b) the satisfaction of the conditions precedent to the proposed asset sale transaction, including obtaining the requisite shareholder approval; (c) the timing and completion of the closing of the proposed transaction; (d) the timing of the proposed meeting of shareholders of the Company; (e) expectations regarding the consideration to be paid to holders of April 2018 Debentures and September 2023 Debentures; (f) the Company's intention to cease to be listed on the TSX and; and (g) waivers of defaults of the Company's credit facilities.

Forward-looking statements are necessarily based on a number of estimates and assumptions that the Company considered appropriate and reasonable as of the date such information is given, including but not limited to the assumptions that the transaction will proceed according to the Company's anticipated timelines; all conditions to the closing of the transaction will be met; the transaction will be completed on the terms currently contemplated; the asset purchase agreement will not be terminated prior to closing; and that required votes for shareholder approval of the transaction and other matters to be considered at the shareholders meeting will be obtained. Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors, many of which are beyond the Company's control, that may cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, including but not limited to the risk that the Company's assumptions on which its forward-looking statements are based may not be accurate; the inability to receive, in a timely manner and on satisfactory terms, the necessary approvals for the transaction and other matters to be considered at the meeting of shareholders of the Company; the inability to satisfy, in a timely manner, all other conditions to the completion of the transaction; the ability of the Board to consider and approve, subject to compliance by the Company of its obligations in this respect under the asset purchase agreement, a superior proposal for the Company; and the risk factors disclosed in the Company's periodic reports publicly filed and available on its SEDAR+ profile at www.sedarplus.ca. The anticipated dates indicated above may change for a number of reasons, including delays in preparing materials in connection with the transaction, the inability to receive the necessary approvals in a timely manner, or the need for additional time to satisfy the conditions to the completion of the transaction. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur. There is no assurance that the proposed transaction will be completed in accordance with its terms or at all. The forward-looking statements contained in this news release are made as of the date of this announcement and the Company does not undertake any obligation to update such forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

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