Chesswood Group Limited

This securities class action seeks to protect investors that purchased Chesswood Group Ltd.’s (“Chesswood“) securities between May 9, 2023 and July 22, 2024 (the “Class Period“).

Chesswood is a Canadian corporation and a responsible issuer under the OSA that is publicly traded. Chesswood reports itself as a holding company whose subsidiaries engage in the business of specialty finance (including equipment finance in the U.S. and vehicle finance and legal sector finance in Canada), as well as the origination and management of private credit alternatives for North American investors. 

Chesswod published material fact news that its business operations and financials were doing well, it was in compliance with its debt covenants, and that investors could rely upon its published financial statements and MD&As. It appears that Chesswood’s statements were inaccurate.

On June 14, 2024, Chesswood reported an ambiguous statement that it was in breach of its minimum borrowing base debt covenants associated with a $300 million senior revolving credit facility and was forced to sell assets (e.g., but omitted to disclose that it was selling assets to a then director of the Company and would be forced to restatement its previously released financial statements).  The market impact of this public corrective statement caused the price of Chesswood’s shares to diminish from $7.49 down to $3.75, or a drop of approximately 50%.

On July 22, 2024, Chesswood released a statement that it would need to restate its 1Q financial statements and MD&A. The market impact of this negative material fact news was harsh and immediate on Chesswood’s securities; sending the share price from $2.81 to $2.66, which continued to fall through the next day down to $2.35.

Chesswood has acknowledged that it may need to restate its financial statements released during Q1 2024 and F/2023.

The Plaintiff and putative Classes suffered a foreseeable economic loss from the market impact of the Public Corrective Disclosures contradicting the material fact statements and the destruction to the corporation as described within the impugned documents.

The Causes of Action

Common law misrepresentations

Part XXIII.1, s. 138.3 of the Ontario Securities Act, if s. 138.8 is granted

UPDATES

On October 29, 2024, FTI Consulting Canada Inc. was appointed by the Court as monitor of Chesswood Group Limited and related parties pursuant to the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the “CCAA”) pursuant to the initial order made October 29, 2024 and amended and restated on November 7, 2024. The Monitor was granted expanded powers to conduct and control the financial affairs and operations of the CCAA Parties pursuant to these orders. A stay of litigation was granted until November 8, 2024.

On November 7, 2024, the stay of proceedings against Chesswood Group Limited and related CCAA Parties was extended until January 31, 2025.

On December 19, 2024, two motions made by FTI Consulting Canada Inc., were approved pursuant to the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the “CCAA”): an order approving the Bidding Procedures for the Sale and Investment Solicitation Process in respect of the CCAA Parties as defined in said Order, and an order approving the Key Employee Retention Plan. Both Orders can be downloaded above.