The Supreme Cannabis Company (TSX: FIRE) has finally begun to solve one of its pressing problems that its been faced with for the last two years. This evening, Supreme announced that it has managed to convert $63.5 million worth of its outstanding 6.0% senior unsecured convertible debentures into common shares of the equity at a reduced conversion price.
While the conversion of $63.5 million of the debt comes at the cost of heavy dilution to shareholders through the issuance of 116.6 million common shares, it does provide the company with some breathing room. The debt, of which there was $100 million in total, was due in October 2021 and was becoming a hefty weight around the neck of the company. The remaining $36.5 million in unsecured convertible debentures has seen its maturity date extended by five years plus one day from the closing date of the amendments.
In connection with the partial conversion, the remaining debt has seen its conversion price reduced from $2.45 per share to $0.285 per share. Upon conversion, this will translate to an additional 128.1 million shares hitting the market. The conversion of the debt can also be forced by the company upon the volume weighted average trading price of the company exceeding $0.45 for a period of ten consecutive trading days, effectively putting a cap on upward momentum for the equity.
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Furthermore, the applicable interest rate for the remaining debentures will nearly double, rising from 6.0% to 11.06% per annum, with interest being paid in the form of additional debenture issuances that are payable in cash upon maturity. Interest however will accrete on a semi annual basis for the first three years of the five year debenture term.
Half of the 116.6 million common shares issued in connection with the partial debt conversion will be free trading, while the other half is subject to a four month hold period.
Supreme Cannabis last traded at $0.20 on the TSX, with a total of 354,627,429 common shares outstanding prior to the conversion of debt.
Information for this analysis was found via Sedar and Supreme Cannabis. 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.
