The Cannabist Company Holdings Inc., a burgeoning player in the cannabis industry, announced its ambitious plan to bolster its financial structure through a significant private placement offering. The company aims to raise up to $19.5 million through the issuance of 9.00% senior secured convertible debentures, set to mature in 2027. This strategic move has already secured binding commitments to the tune of $17.5 million, with potential for an additional $2 million in commitments before the offering closes.
Further fortifying its financial strategy, The Cannabist Company has also decided to issue an additional $6.25 million of these debentures in exchange for the cancellation of its previously issued 6% senior secured convertible notes, due in 2025. This swap involves specific offshore institutional investors and represents a savvy approach to managing and restructuring existing debt.
The terms of these debentures highlight their allure to investors, offering conversion into 3,278.6 common shares of The Cannabist Company per $1,000 of principal amount, which translates to an approximate price of $0.305 per share. This conversion rate is notably pegged at a 25% premium over the closing price of the company’s shares as of March 14, 2024, on the Cboe Canada, underscoring the company’s optimistic valuation of its stock.
In financial maneuvers such as these, details matter. The debentures are being offered at an original issue discount, meaning they are priced at $800 for each $1,000 of principal, effectively allowing the company to net $15.6 million in new capital while extinguishing $5 million of its existing debt. This transaction, expected to close around March 19, 2024, is contingent upon regulatory approvals, including the nod from the Exchange, and is subject to a customary four-month hold period as per Canadian securities laws.
The intended use of the proceeds from this offering is clear-cut: to repay outstanding debt, specifically the remaining $13.2 million of 13% senior secured notes due in May 2024, and to bolster the company’s working capital and general corporate purposes. This strategic financial restructuring is critical for The Cannabist Company as it seeks to solidify its footing in the competitive cannabis market.
It is essential to note that the securities in question have not been registered under the U.S. Securities Act or any state securities laws, and thus, their offering is restricted to certain exemptions from these registration requirements. The company has made it clear that this announcement does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where such an offer or sale would be illegal.
In conclusion, The Cannabist Company’s move to secure additional funding through a private placement offering of convertible debentures is a strategic effort to streamline its financial obligations and fuel its growth ambitions. By converting existing debt into potentially lucrative convertible debentures, the company is not only managing its financial liabilities more effectively but also providing an attractive investment opportunity for those betting on the future of cannabis. This initiative reflects The Cannabist Company’s proactive approach to financial management and its commitment to sustaining and expanding its operations in a rapidly evolving market.
