iAnthus Capital Shareholders To Be Effectively Wiped Out In Recapitalization Transaction

It’s officially game over for current iAnthus Capital (CSE: IAN) shareholders. The company announced this morning that it has entered into a restructuring support agreement, with two scenarios being put into place. The first, results in current shareholders retaining 2.75% of the company. The second, results in the shareholders retaining 0%.

The restructuring support agreement was entering into with 100% of iAnthus’ secured lenders, and over 91% of the unsecured debentureholders. The recapitalization transaction proposes outstanding debt will be reduced from $168.7 million as of June 30, which excludes fees and interest, to $101.4 million, which figure excludes $20 million in preferred equity.

The recapitalization transaction is to go one of two routes. First, is referred to as “arrangement proceedings” under BC’s Business Corporations Act. If the firm fails to go this path, it will be required to recapitalize under the Companies Creditor Arrangement Act – aka, file for creditor protection.

Under the transaction, the following will occur:

• Outstanding secured debentures will be reduced from $97.5 million to $85 million, with the interest rate being reduced by 5% per annum, interest will no longer be “cash pay”, the conversion feature removed, and the original maturity date will be extended by “over four years.”
• $60 million in unsecured debentures will be exchanged for equity
• Preferred equity of $5 million is to be issued to the secured lenders, while $15 million will be issued to unsecured debenture holders, with the equity having a five year maturity and no cash pay dividends.
• All existing options are warrants are to be cancelled.
• Obligations to employees, customers, and suppliers will not be affected, and will continue in the ordinary course.

This next part is key to current shareholders, and the detail that must be paid attention to.

• Secured lenders and unsecured debt holders will be issued an equal amount of common shares of iAnthus. Each will own 48.625% of the company if the recapitalization transaction occurs through the BC’s Business Corporation Act. This leaves current shareholders owning a total of 2.75% of iAnthus upon completion of the transaction.
• If required to be performed under CCAA proceedings, the secured lenders and unsecured debenture holders will each receive 50% of the common shares of the company, meaning shareholders get nothing.

All holders of secured debt owed to the company, and 91% of unsecured debenture holders of the company have agreed to support the recapitalization transaction and vote in favour of the plan of arrangement that is to be filed by the company.

Finally, in connection with the plan of arrangement, certain of the secured lenders have agreed to lend $14 million to iAnthus on the same terms of the restructured senior debt. This is to be funded within three days of execution of the restructuring support agreement.

The plan of arrangement is subject to stakeholder approval at meetings currently anticipated to be held in September.

Lastly, iAnthus has indicated that it intends to file its outstanding financials on or before the 90 day deadline to do so under its current cease trade order.

iAnthus Capital remains halted.

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Information for this briefing was found via Sedar and iAnthus Capital Holdings 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.