Organigram Holdings (TSX: OGI) (NASDAQ: OGI) on Thursday quietly announced that they had repaid outstanding facilities with the Bank of Montreal. This payoff comes just months after the company amended the debt terms in November 2020.
While it is not explicitly stated within the news release, it appears that the Bank of Montreal may have been uncomfortable holding the debt. After having been extended in May 2020 to a total figure of $115 million with principal repayments to begin in November 2020, the comfort of BMO with the debt appears to have changed mid-2020.
Despite having expanded the credit facility in May, the debt facility saw its capacity reduced from $115 million to just $60 million in November, three days before the first principal repayment was to occur. Instead of a minor repayment, the company was forced to repay a total figure of $55.0 million on December 1, with further quarterly repayments of $1.5 million to begin in February 2021. The revolver commitment meanwhile was severely cut, falling from $25.0 million to just $2.0 million.
The November amendment also cut certain covenants that the firm was bound by, which appears to be the main reason for modification – Organigram clearly wasn’t expecting to make the minimum EBITDA targets that it had previously committed to. The maturity however still stood at May 31, 2022.
Fast forward to Thursday, and the company quietly announced via a 9:00 PM news release before the long weekend that it had repaid its credit facilities outstanding with BMO – news that generally would be quite positive if the company had intended to remove the debt. In total, approximately $58.5 million was repaid to pay off all outstanding balances with the bank.
The company was quick to highlight the $2.7 million in annual interest savings that it would see as a result of the debt being paid off, as well as its “pro forma” cash position of $235 million. However, the last paragraph is what drew our ire:
“The Company is in discussions with BMO to amend the Credit Agreement to provide continuing support and flexibility to Organigram in growing its business on revised terms and conditions.”
This leaves us asking the question – did BMO call its loan from Organigram Holdings?
Information for this briefing was found via Sedar and Organigram Holdings. 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.
