Canopy growth (TSX: WEED) appears to be doing what it can to eliminate its debt obligations before they come due. The firm last night announced an arrangement, whereby a significant portion of outstanding unsecured convertible senior notes are to be settled for shares of the company.
The arrangement will see C$255.4 million of the firms 4.25% senior notes due 2023 acquired from noteholders. The debt is to be acquired in exchange for common shares of the company, with roughly $3.0 million in cash to be used as well to settle unpaid interest due.
Consideration to be paid is to consist of $252.8 million, excluding interest. Payment is to be settled in shares based on the volume weighted average price of the equity on the Nasdaq for a period of ten trading days beginning June 30, 2022. The conversion has a floor price of US$2.50 per share, and a ceiling of US$3.50 per share.
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The first payment of shares is to occur June 30, and will consist of roughly 34.1 million shares, with the remainder to be settled July 18.
Constellation Brands (NYSE: STZ), a major holder of Canopy, will see half of its $200 million in notes included in the arrangement. The company as a result will see its holdings in the company increase from 5.4% to 7.6% based on the conversion price of the debt. Prior to the transaction, the company held a 35.3% stake in Canopy.
Notably, as part of the arrangement, the company has waived the ability to settle any of the remaining notes in the form of shares. Notes not included in the conversion arrangement announced last night as a result will now be settled in cash.
The remaining notes will come due July 15, 2023. With $600 million in notes initially issued in 2018, the company is estimated to have a remaining $344.6 million in principal owing on the notes following the arrangement. The company last reported a cash position of $776.0 million, along with short-term investments of $595.7 million.
Canopy Growth last traded at $4.49 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.
