Zenabis Global (TSX: ZENA) may have pushed off insolvency a little longer this morning. The company has managed to renegotiate approximately $50.0 million of its currently outstanding senior secured debt. Under the amended agreement, this debt will now convert to a term loan that expires March 31, 2025.
The new debt will see straight line amortization over a period of 36 months beginning April 1, 2022. However, these modifications came with a hefty price tag.
While Zenabis has managed to push off the maturity of debt that it most certainly couldn’t cover otherwise, the firm also managed to secure $10.75 million in new funding. However, this is largely short term or essentially a fee for the extension of maturity on the current loan. Of that $10.75 million figure, $3.75 million will be paid immediately to the syndicate of lenders as an amendment fee for the debt. The remaining $7.0 million will be reduced by 5% as a fee, which amounts to $350,000. That $7.0 million has an interest rate of 14% per annum, and is to be repaid by July 20, 2020. Essentially it appears to be a short term loan that will be paid off when Zenabis manages to sell its Zenabis Delta facility.
In addition to the large cash fee paid by the company, Zenabis will now be subject to a royalty whenever net cannabis revenues exceed $20.0 million in a fiscal quarter, at a rate beginning at 3.5% which has a declining schedule after certain revenue figures are met. Additionally, current shareholders of the firm may be about to be diluted heavily thanks to 71.2 million warrants being issued with an exercise price of $0.07 for a period of five years.
It’s unclear at this time exactly what the total debt Zenabis now has due in June 2020 thanks in part to the utter mess of its financial statements related to loans and borrowings as well as convertible debt.
Outside of financial modifications, Zenabis also identified that Adam Spears and Larry Van Wieren have stepped down from the board of directors. Monty Sikka has also stepped down from his role of chairman, however will stay on as a director. Daniel Burns has been appointed as chair of the board in his place.
Zenabis Global last traded at $0.075 on the TSX.
Information for this briefing was found via Sedar and Zenabis Global 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.
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the issuance of 71,255,522 Zenabis common share purchase warrants to the Senior Lenders (each, a “Warrant” and collectively, the “Warrants”), with each Warrant entitling its holder to purchase a Zenabis common share at a price of $0.7017 for a period of five years.Its not warrants being issued with an exercise price of $0.07 for a period of five years.