CHESSWOOD ANNOUNCES AGREEMENT FOR TRANSFORMATIVE ACQUISITION OF BLUE CHIP

LEASING AND ECOHOME FINANCIAL

Established Prime Lessor and Emerging Consumer Finance Businesses Position Chesswood for Continued Growth in Multiple North American Markets

• Addition of Blue Chip provides Chesswood with a North American platform able to fully leverage product and target-market expertise
• Acquisition of EcoHome provides access to the highly attractive consumer finance market, which is counter-cyclical to Chesswood’s existing commercial equipment finance businesses
• Transaction is expected to be high single-digit accretive to EPS in the first full year of operations

TORONTO, February 26, 2015 – Chesswood Group Limited (“Chesswood” or the “Company”) (TSX: CHW) is pleased to announce that it has entered into an agreement to acquire Blue Chip Leasing Corporation (“Blue Chip”) and EcoHome Financial Inc. (“EcoHome”). Blue Chip is a tenured, prime, small ticket equipment finance company serving brokers and vendors from coast-to-coast in Canada. Blue Chip has almost two decades of experience in the Canadian commercial leasing industry, and had net finance receivables of $74 million as of September 30, 2014.

EcoHome provides financing solutions to the heating ventilating and air conditioning (HVAC) and home improvement markets. This is an attractive market generally characterized by the high credit quality that Canadian homeowners demonstrate along with longer terms on the related loans and rentals. EcoHome had net finance receivables of $47 million as of October 31, 2014.

Transaction Highlights
This transformative acquisition is expected to enhance Chesswood’s financial and operational strength and growth prospects, in several important ways:

• Establishes a North American Platform. Allows Chesswood to leverage product and target market expertise in both Canada and the U.S.
• Enhances Scale. Significant scale is gained, with a pro forma portfolio of net finance
• receivables of $315 million as of September 30, 2014.
• Financially Attractive with Strong Cash Flows. The proposed acquisition is expected to be high single-digit accretive to earnings per share in the first full year of operations. This accretion and the enhanced growth opportunities are expected to deliver strong free cash flows and support Chesswood’s track record of paying and growing dividends.
• High Growth, Complementary Market. Entry into the high growth consumer finance market, which is counter-cyclical to Chesswood’s existing businesses.
• Greater Diversification. In addition to diversification through the counter-cyclicality of EcoHome’s business, the acquisition provides further diversification in terms of products, geographic concentration and credit quality. Blue Chip’s prime portfolio enhances the overall credit quality of the consolidated financing portfolios.
• Management Team Fully Aligned and Incentivized. The acquisition adds management with almost two decades of experience. Each of Daniel Wittlin (CEO of Blue Chip and EcoHome) and Ed Dias (President of EcoHome) will be entering into multi-year employment agreements. In addition, Mr. Wittlin will join the board of Chesswood and will be assuming the role of Chesswood’s Chief Operating Officer. Both Mr. Wittlin and Mr. Dias will be indirectly acquiring a significant number of Chesswood shares as part of the transaction, which will be subject to multi-year escrow arrangements. The purchase agreement for these acquisitions also includes significant incentives tied to performance of Blue Chip and EcoHome over the next several years.
• Efficiencies and Growth Opportunities. The sharing of expertise and infrastructure is expected to generate synergies and accelerate growth.

“We are tremendously excited by the critical mass and breadth of programs this transaction provides Chesswood” said Barry Shafran, Chesswood’s President and CEO. “Blue Chip brings years of experience in the prime equipment finance space and a pattern of growing profitability to Chesswood, which will allow us to have a complete product offering to the commercial equipment finance industry” added Shafran.

“Adding EcoHome to Chesswood’s fold not only adds almost $50 million of net finance receivables to our portfolio, and earnings to our bottom line, it also allows us to enter the consumer finance market where we believe we can grow substantially, in Canada to begin with, and eventually in the U.S.” said Shafran. EcoHome has experienced significant growth since its inception in 2010 and has carved out a niche in the home improvement finance market, primarily in Ontario, that provides superior returns on equity and continued growth prospects.

“For our shareholders, Blue Chip and EcoHome provide the strategic platform to accelerate the growth and diversification of Chesswood’s revenues and cash flows,” said Shafran, “and importantly, the transaction is expected to be high single-digit accretive to EPS in the first full year of operations.” Chesswood has increased its dividend eight times since 2009 and the strong cash flows provided by the acquisition are expected to enhance the Company’s ability to continue to grow dividends.

Acquisition Terms and Timing

Chesswood will pay an aggregate of $64 million to acquire Blue Chip and EcoHome with the possibility of additional consideration if performance targets are exceeded. The purchase price for the acquisition will be paid through a combination of (i) $17 million of cash, (ii) approximately $28 million from a fully committed senior secured bridge facility, that is to be replaced with the proceeds from an equity public offering, subject to market conditions, (iii) approximately $6 million in equity through a private placement to certain senior management, directors and other insiders of Chesswood, and (iv) the issuance of Chesswood common shares to the vendor for the balance. Closing of the acquisition is subject to customary conditions and regulatory and third party consents, and is expected to occur as soon as practicable but no later than April 3, 2015.

Each of Chesswood’s directors, including its CEO, and the Board’s advisor, Mr. Edward Sonshine, will be participating in the private placement offering referred to above, reflecting their commitment to Chesswood’s future and their support for this transformative acquisition.

“We’re very excited to be joining Chesswood in what we consider to be a truly strategic transaction” said Wittlin. “Blue Chip, EcoHome and Chesswood’s businesses will help accelerate the growth of one another. We will be creating critical mass and entering into a new market segment for Chesswood in Canada” added Wittlin. “We believe very strongly in the potential for this North American platform. I am excited by the opportunity to become a significant shareholder of Chesswood, and to become its new Chief Operating Officer.”

RBC Capital Markets acted as Chesswood’s financial advisor on the transaction. McCarthy Tétrault LLP served as Chesswood’s legal counsel.

Fourth Quarter Financial Results

Chesswood’s audited results for the 2014 year-end will be issued later in March and the Company expects to report fourth quarter Adjusted EBITDA of $5.0 million, compared to $5.2 million in the  same period of the prior year. Non-recurring items during the quarter include the Company’s write-off of the remaining $607,000 in unamortized bank fees under Pawnee’s revolving line of credit, which was retired in December and replaced by Chesswood’s new U.S.$150 million revolving line of credit. The Company expects to report net income for the fourth quarter of $1.9 million, which would represent approximately 11% growth over the prior year fourth quarter net income of $1.7 million. These figures are all based upon management’s unaudited financial statements, pending completion of Chesswood’s year-end audit.

Chesswood is providing these preliminary results in light of the circumstances of the proposed acquisition and potential financing, and does not intend to continue to provide preliminary results for future periods.

Non GAAP Measures

References to Adjusted EBITDA are not recognized measures under International Financial Reporting Standards and do not have standard meanings.

Accordingly, these measures may not be comparable to similar measures presented by other issuers.

About Chesswood Group Limited 

Chesswood is a specialty finance company with operating businesses in both Canada and the U.S.

To learn more about Chesswood Group Limited, visit www.ChesswoodGroup.com . The separate websites of Chesswood Group Limited’s operating businesses are at www.PawneeLeasing.com , www.windsetcapital.com , www.nstarleasing.com and www.AcuraSherway.com.

Forward Looking Statements

This news release includes forward-looking information that is based on certain assumptions and reflects Chesswood’s current expectations. All statements other than statements of historical fact, are forward-looking statements. Forward-looking statements are provided for the purposes of assisting the reader in understanding Chesswood’s financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present
information about management’s current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of Chesswood and its subsidiaries (including Blue Chip and EcoHome), as well as the outlook for North American and international economies for the current fiscal year and subsequent periods. Forward-looking statements
include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects”, “anticipates”, “plans”, “believes”, “estimates”, “seeks”, “intends”, “targets”, “projects”, “forecasts” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”.

By its nature, this information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond Chesswood’s control, affect the operations, performance and results of Chesswood and its subsidiaries and their businesses, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: (i) continuing access to required financing (and, for certain subsidiaries, securitization or bulk leasing facilities); (ii) continuing access to products to allow Chesswood and its subsidiaries to hedge their exposure to changes in interest rates and foreign exchange; (iii) risks of increasing default rates on leases, loans and advances; (iv) Chesswood’s provision for credit losses; (v) increasing competition (including, without limitation, more aggressive risk pricing by competitors); (vi) increased governmental regulation of the rates and methods we use in financing and collecting on our equipment leases or loans, on the legal funding business generally and on our working capital loans; (vii) dependence on key personnel; (viii) general economic and business conditions; and (ix) the risks that Chesswood’s expectations in respect of Blue Chip and EcoHome (or expected efficiencies and synergies from these proposed acquisitions) will not be met or that the information provided to in respect of Blue Chip and EcoHome is materially incorrect.

The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management’s perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including that the list of factors in the prior paragraph, collectively, are not expected to have a material impact on Chesswood and its subsidiaries. While Chesswood considers these assumptions to be reasonable based on information currently available to management, they may prove to be incorrect.

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Contact:
Barry Shafran
Chesswood Group Limited
416-386-3099
bshafran@chesswoodgroup.com
NO STOCK EXCHANGE, SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE INFORMATION CONTAINED HEREIN.