Zenabis Global (TSX: ZENA) this morning announced that it has sold off that of Bevo Farms, the firms propagation subsidiary, to that of Langley Propagation and Floral Company Ltd in an overly complex transaction. The transaction will effectively remove $42.5 million of debt from Zenabis’ balance sheet, all of which was held at a charter 1 bank, while enabling the company to secure cash to keep its cannabis operations afloat.
Referred to specifically as a “rental rebate, liability contribution and share purchase agreement,” the transaction has a number of components to it. The transaction will see Zenabis continue its operations at its cannabis facility in Langley, which is reportedly owned by Bevo and leased by Zenabis. The company will now pay $750,000 in quarterly rent, while receiving a rebate of $375,000 per quarter for a period of six years. The company will also see a short term rent rebate of $5.7 million granted that includes forgiveness of certain rent payable as well.
On closing, Zenabis will receive cash equal to $10.0 million, which is subject to adjustment for certain payables to discharge certain outstanding Bevo debt, which is to be paid at closing, with limited recourse guarantees being granted by the shareholders of Langley for $13.7 million. A total of $42.5 million is to be taken off the books as a result of the transaction, however Zenabis will continue to provide an unsecured guarantee on the obligations of this credit agreement until January 22, 2022 at the latest, with Zenabis having certain management approval rights until the obligation is removed.
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The company will see Bevo Agro’s management team remain with Bevo following the transaction. A specific date for the completion of the transaction was not provided.
The company this morning also announced that it has made a sale to an undisclosed licensed producer in Canada for the sale of $7 million worth of dried cannabis on delivery terms yet to be agreed upon. The buyer may at their discretion elect to instead enter a private placement with Zenabis as an alternative to completing the purchase of cannabis as well.
The transaction was arranged such that the proceeds from the sale to be paid directly to that of Sundial Growers to settle $7.0 million in principal repayments due under an outstanding debt agreement.
As a result of the transactions, the company now has $65.1 million in outstanding debt on its balance sheet as of December 31, 2020, down from $119.1 million in the prior quarter.
Zenabis Global last traded at $0.055 on the TSX.
Information for this briefing was found via Sedar and Zenabis Global. 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.
