Company Announces Accretive Reduction of
Corporate Debt, Preservation of Cash, and an Improved Financial
Position Through a Series of Agreements Supported by Secured and
Unsecured Lenders
SMITHS
FALLS, ON, July 14, 2023 /CNW/ - Canopy Growth
Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ:
CGC) announced today that it has entered into a series of
agreements, including privately negotiated redemption
agreements (the "Redemption Agreements") with certain holders of
its unsecured senior notes due July 15,
2023 (the "Existing Notes") and agreements with certain of
its lenders under its term loan credit agreement dated March 18, 2021 (the "Credit Agreement"), that
will have the overall effect of deleveraging the Company's balance
sheet.
Highlights
- Total Debt Reduction: ~ $4371 million expected over the
next 2 quarters
- Annualized Interest Expense Savings: ~ $20 – $30
million
- Discount Capture: Repayment of principal owing under the
Credit Agreement between 93% and 95% of par
- Elimination of Call Premium: Ability to prepay
remainder of loan at par
- Enhanced Equity Capitalization: Conversion of ~ 41%
of Existing Notes into Common Shares
As a result of the agreements with our secured and unsecured
lenders, the Company is expected to reduce its total debt by
approximately $437 million over the
next 6 months and lower annual interest costs by approximately
$20 to $30
million. Following the completion of the transactions
contemplated by the Redemption Agreements, the Company will
preserve approximately $92 million in
cash by settling approximately $193 million aggregate
principal amount of the Existing Notes with a mix of consideration
that includes common shares of the Company (the "Common Shares")
and newly issued unsecured non-interest bearing convertible
debentures (the "Debentures"). Additionally, the Company will
reduce $100 million of principal
indebtedness under the credit facility provided under the Credit
Agreement (the "Credit Facility") for a cash payment of
$93 million, with the expectation of
further principal reductions at $0.95
on the dollar upon completion of certain asset sales.
The Company believes that its enhanced financial flexibility,
delevering of its balance sheet, and the anticipated results of the
business transformation underway, continue to ensure that Canopy
Growth has a sustainable business platform, and remains positioned
to be a leader in the $50 billion
North American cannabis market.
"We are pleased to have worked constructively with our lenders
to reach these agreements which enable Canopy Growth to preserve
cash, and further improve its balance sheet through accretive and
meaningful reductions in its overall debt," said Judy Hong, Chief Financial Officer, Canopy
Growth. "We believe these latest milestones, in addition to actions
Canopy Growth has taken to strengthen its balance sheet and its
continued execution on the cost reduction program, will provide
investors and all of our stakeholders with increased confidence in
our path to long term value creation."
"We are pleased to have been able to come to an agreement with
Canopy Growth that will strengthen its balance sheet and provide a
path towards continued improvements in its financial position. We
look forward to continuing to work with the Company to ensure a
successful outcome for all stakeholders," said a spokesperson on
behalf of lenders under the Credit Facility.
Transaction Details
Pursuant to the terms of the Redemption Agreements,
approximately $193 million of the
$225 million aggregate principal
amount under the outstanding Existing Notes and due July 15, 2023 will be redeemed on the closing
date for (i) an aggregate cash payment of approximately
$101 million; (ii) the issuance of
approximately 90.4 million Common Shares; and (iii) the issuance of
approximately $40.4 million aggregate
principal amount of Debentures (the "Redemption"). The Debentures
will be convertible into Common Shares (the "Debenture Shares") at
the option of the holder at any time or times following the
Shareholder Approval (as defined below), at a conversion price
equal to $0.55, subject to adjustment
in certain events.
Following the completion of the Redemption, there will be
approximately $31.9 million aggregate
principal amount owing under the outstanding Existing Notes.
In addition, under the terms of the amended Credit Agreement,
the Company will make a payment of $93
million in cash to reduce $100
million of principal indebtedness under the Credit Facility.
The Company has also agreed to direct proceeds from certain
completed and contemplated asset sales to reduce indebtedness under
the Credit Facility and receive principal reductions at, in certain
circumstances, $0.95 on the dollar
toward such repayments and the removal of certain onerous financial
covenants.
Since the beginning of fiscal 2023, Canopy Growth has completed
numerous balance sheet actions to strengthen its financial
position, while implementing a business transformation plan with
the goal of improving profitability. The balance sheet actions
completed by the Company to date include:
- Equitization of approximately $3662 million of the Existing
Notes;
- Paydown of approximately $350
million (or 35% of the principal) of the Credit Facility at
$0.93 per dollar of
debt;
- Refinanced $100 million of the
Existing Notes held by Greenstar (as defined below) in order to
extend the maturity date to December 31,
2024; and
- Generated approximately $81
million in cash proceeds during the most recent fiscal
quarter from the disposition of five facilities with
additional agreements in place to generate up to $150 million in total proceeds by September 30, 2023.
Annual General and Special Meeting Update
Canopy Growth intends to file its preliminary proxy statement in
connection with the Company's Annual General and Special Meeting to
be held on September 25, 2023 (the
"Meeting"), on July 14, 2023. In
addition to the normal course business brought before the Meeting,
the Company intends to seek shareholder approval for, among other
things, (i) the issuance of all of the Debenture Shares in excess
of 19.99% and 25%, as applicable, of the issued and outstanding
Common Shares in accordance with the applicable rules and
regulations of the Nasdaq Stock Market and the Toronto Stock
Exchange in connection with the Redemption (the "Shareholder
Approval"), and (ii) the adoption of a new simplified equity plan.
The Company received a notice from Nasdaq Stock Market LLC on
July 11, 2023 of its non-compliance
with the Nasdaq's minimum listing requirements relating to the
closing bid price being below $1.00
per Common Share for 30 consecutive business days.
On July 13, 2023, the Company
entered into a voting support agreement with Greenstar Canada
Investment Limited Partnership ("Greenstar") and CBG Holdings LLC
("CBG" and together with Greenstar, the "CBG Group"), our largest
shareholders, pursuant to which the CBG Group has agreed to vote
their Common Shares in favor of the Shareholder Approval. As of the
date hereof, the CBG Group held 171,499,258 of Common Shares.
The Redemption is being conducted as a private placement, and
any Common Shares and Debentures to be issued in the Redemption
will be issued pursuant to the exemption from the registration
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), afforded by Section 4(a)(2) of the Securities
Act in transactions not involving any public offering. This press
release is neither an offer to sell nor a solicitation of an offer
to buy any securities described above, nor will there be any offer,
solicitation or sale of any securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful.
Advisors
The Company has engaged Greenhill & Co. Canada Ltd. as its
financial advisor and is advised by its legal counsel Cassels Brock & Blackwell LLP and Goodwin
Procter LLP. HudsonWest acted as financial advisor to the Company
in connection with the Redemption of the Existing Notes.
About Canopy Growth
Canopy Growth is a leading North American cannabis and CPG
company dedicated to unleashing the power of cannabis to improve
lives.
Through an unwavering commitment to our consumers, Canopy Growth
delivers innovative products with a focus on premium and mainstream
cannabis brands including Doja, 7ACRES, Tweed, and Deep Space. Our
CPG portfolio features sugar-free sports hydration brand BioSteel,
targeted 24-hour skincare and wellness solutions from This Works,
gourmet wellness products by Martha Stewart CBD, and category
defining vaporizer technology made in Germany by Storz & Bickel.
Canopy Growth has also established a comprehensive ecosystem to
realize the opportunities presented by the U.S. THC market through
its rights to Acreage Holdings, a vertically integrated multi-state
cannabis operator with principal operations in densely populated
states across the Northeast, as well as Wana Brands, a leading cannabis edible brand in
North America, and Jetty Extracts,
a California-based producer of
high-quality cannabis extracts and pioneer of clean vape
technology.
Beyond our world-class products, Canopy Growth is leading the
industry forward through a commitment to social equity, responsible
use, and community reinvestment—pioneering a future where cannabis
is understood and welcomed for its potential to help achieve
greater well-being and life enhancement.
For more information visit www.canopygrowth.com.
Notice Regarding Forward-Looking Information
This news release contains "forward-looking statements" within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and "forward-looking information" within the
meaning of applicable Canadian securities legislation. Often, but
not always, forward-looking statements and information can be
identified by the use of words such as "plans", "expects" or "does
not expect", "is expected", "estimates", "intends", "anticipates"
or "does not anticipate", or "believes", or variations of such
words and phrases or state that certain actions, events or results
"may", "could", "would", "might" or "will" be taken, occur or be
achieved. Forward-looking statements or information involve known
and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company or
its subsidiaries to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements or information contained in this news
release. Examples of such statements and uncertainties include
statements with respect to the Company's debt reduction, the
anticipated issuance of the Common Shares, Debentures in connection
with the Redemption, the anticipated aggregate principal amount
outstanding under the Existing Notes following the completion of
the Redemption, the anticipated timing of the Meeting and the
proposals to be voted upon by the Company's shareholders,
statements with respect to the additional facility divestitures,
the proceeds to be received by the Company from such divestitures,
the timing of any additional facility divestitures, the Company's
strategy focused on profitability, benefits of the Redemption and
the amendments to the Credit Agreement, the Company's strategy to
strengthen its financial position, and expectations for other
economic, business, and/or competitive factors.
Risks, uncertainties and other factors involved with
forward-looking information could cause actual events, results,
performance, prospects and opportunities to differ materially from
those expressed or implied by such forward-looking information,
including the risk that the Shareholder Approval is not obtained at
the Meeting; negative operating cash flow; uncertainty of
additional financing; use of proceeds; volatility in the price of
the Common Shares; inherent uncertainty associated with
projections; expectations regarding future investment, growth and
expansion of operations; regulatory and licensing risks; changes in
general economic, business and political conditions, including
changes in the financial and stock markets and the impacts of
increased rates of inflation; legal and regulatory risks inherent
in the cannabis industry, including the global regulatory landscape
and enforcement related to cannabis; additional dilution; political
risks and risks relating to regulatory change; risks relating to
anti-money laundering laws; compliance with extensive government
regulation and the interpretation of various laws regulations and
policies; public opinion and perception of the cannabis industry;
and such other risks contained in the public filings of the Company
filed with Canadian securities regulators and available under the
Company's profile on SEDAR at www.sedar.com and with the United
States Securities and Exchange Commission through EDGAR at
www.sec.gov/edgar, including under the heading "Risk Factors" in
the Company's annual report on Form 10-K for the year ended
March 31, 2023.
In respect of the forward-looking statements and information,
the Company has provided such statements and information in
reliance on certain assumptions that they believe are reasonable at
this time. Although the Company believes that the assumptions and
factors used in preparing the forward-looking information or
forward-looking statements in this news release are reasonable,
undue reliance should not be placed on such information and no
assurance can be given that such events will occur in the disclosed
time frames or at all. Should one or more of the foregoing risks or
uncertainties materialize, or should assumptions underlying the
forward-looking information prove incorrect, actual results may
vary materially from those described herein as intended, planned,
anticipated, believed, estimated or expected. Although the Company
has attempted to identify important risks, uncertainties and
factors which could cause actual results to differ materially,
there may be others that cause results not to be as anticipated,
estimated or intended. The forward-looking information and
forward-looking statements included in this news release are made
as of the date of this news release and the Company does not
undertake any obligation to publicly update such forward-looking
information or forward-looking information to reflect new
information, subsequent events or otherwise unless required by
applicable securities laws.
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1 This
number assumes equitization of the Debentures.
|
2 This
number assumes equitization of the Debentures.
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SOURCE Canopy Growth Corporation