Aphria Inc (TSX: APHA) (NASDAQ: APHA) has offloaded the weight around its neck that was a senior secured convertible debenture in HydRx Farms Ltd. The debenture was purchased by that of Cobra Ventures, a joint venture 50% owned by World Class Extractions (CSE: PUMP).
The convertible debenture was originally purchased by Aphria on August 14, 2017, with a face value of $11.5 million. Bearing interest at 8% per annum, it was originally to mature in two years from the date of issuance. The company then granted an extension to the maturity date to that of January 16, 2020, after which time it still remained unpaid.
As of Aphria’s latest financial statements for the year ended May 31, 2020, the company had indicated that the debt still remained unpaid by HydRx Farms, and as a result the firm was enforcing security over the assets. At the time, Aphria had written down the value of the debt to $6.0 million in connection with the perceived value of the assets of the firm that could be secured.
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Now, it appears that that $6.0 million was still a high valuation, despite the markdown from a principal amount of $11.5 million. It was announced this morning that Cobra Ventures had purchased the debenture for $5.0 million, with World Class attempting to make it sound like a steal of a deal, headlining the news release as, “World Class Extractions Subsidiary Acquires $11.5 Million Senior Secured Convertible Debenture from Aphria for $5,000,000.”
The World Class joint venture evidently intends to secure the assets of HydRx Farms, which consists of a 45,000 square foot manufacturing facility built on 2.3 acres of land in Whitby, Ontario. The site is licensed to cultivate, process, and sell medical and recreational cannabis products.
Aphria Inc last traded at $4.44 on the Nasdaq.
Information for this briefing was found via Sedar and Aphria Inc. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
