Canopy Growth Corp (TSX: WEED) is imploding its capitalization table as a means of reducing its current debt load and delevering its balance sheet.
The arrangement comes just a day shy of the maturity of $225 million in aggregate principal amount of existing notes, which are set to mature on July 15. In an effort to avoid dropping the cash required to satisfy the maturity, the company has entered into a series of arrangements with certain noteholders that instead will significantly expand the current outstanding share count of the company.
Approximately $193 million of principal under the existing note is set to be exchanged for a combination of cash, shares, and new debentures. That debt instead will see an aggregate cash payment made of $101 million to satisfy the debt, along with the issuance of $90.4 million in common shares, and the issuance of $40.4 million aggregate principal amount of new debentures.
The new convertible debentures are unsecured and non-interest bearing, and will contain a conversion price of $0.55 per share.
The series of transactions is anticipated to save approximately $92 million in cash, while converting 41% of the notes into common shares.
In addition to the settlement of notes, Canopy intends to reduce its outstanding credit facility by $100 million via a cash payment of $93 million, with further reductions to occur following certain asset sales, at a rate of $0.95 on the dollar.
The reductions in debt, including certain repayments following the sale of assets, is expected to amount to $437 million over the next two quarters, while saving interest expenses of $20 to $30 million.
A special meeting of shareholders will seek approval for the issuance of the debenture shares in excess of 19.99% of the outstanding common shares of the company.
Separately, the company has indicated that it has received a notice from the Nasdaq related to the firms failure to maintain the $1.00 minimum bid requirement on the exchange for a period of 30 days. The company has not addressed how it intends to resolve the issue, the most common resolution for which is a share consolidation.
Canopy Growth last traded at $0.85 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
