Chesswood Group made a temporary change in its monthly dividend and announced other measures to deal with COVID-19, including reductions to staff and management salaries.

“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.”

In addition, Chesswood has taken a number of steps for the benefit of the businesses, based on what is known today and recognizing a rapidly changing environment:

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

Chesswood 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 our 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 our technology to facilitate more effective communications in a remote work environment

Like most in the industry, Chesswood has been receiving and processing requests for temporary payment accommodations and deferrals from its small and medium-sized small business customers in the U.S. and Canada. These are not forgiven payments. They are amounts that our customers still have an obligation to pay. In general, Chesswood is 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 its 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 Chesswood expects to experience charge-offs in excess of pre-COVID levels for some number of months.

A large majority of our customers continue to make their payments — to date Chesswood has only provided payment accommodations and deferrals to approximately 16% 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.

Chesswood’s 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.

Following many treasury accomplishments in the fall of 2019, Chesswoood enhanced its liquidity considerably while our leverage remains moderate. The company noted that it has ample capacity 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.