Aleafia Health Announces Closing of Debenture Amendment Transaction

Rhea-AI Summary

Aleafia Health has completed the amendment of its unsecured convertible debentures, enhancing its financial position. The company secured liquidity of up to $11.6 million for working capital and growth initiatives, with no mandatory cash interest payments for up to 30 months. The debentures are now structured into three series due between 2024 and 2028, with an interest rate of 8.5%. These changes aim to bolster cash flow and facilitate organic growth and strategic acquisitions.

Positive

• Increased liquidity by up to $11.6 million.
• No mandatory cash interest payments for 24-30 months.
• Improved cash flow dynamics.
• New debentures structured over a span of 6 years.

Negative

• None.

TORONTO, June 28, 2022 (GLOBE NEWSWIRE) -- Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is pleased to announce that it has closed its previously announced amendment of its unsecured convertible debentures (the “Debenture Amendments”).

“We are delighted we have now completed this transaction,” said Tricia Symmes Aleafia Health’s CEO. “We want to thank all those who participated for demonstrating their confidence in the Company’s future. Coupled with the closing of the $5.6 million private placement announced last week, the Company is now much better positioned to execute on its ambitious growth plans in all key segments of its business: adult-use, medical and international.”

“The two transactions are transformative for Aleafia Health’s balance sheet,” said Matt Sale, Aleafia Health’s CFO. “They increase our liquidity by up to $11.6 million which will be used to fund working capital, capex and other growth initiatives; improve our cash flow dynamic with no mandatory cash interest payment for between 24 and 30 months; balance our refinancing profile due to the staggering of the New Debentures’ maturities over a span of 6 years; and increase our financial flexibility to pursue organic growth initiatives and strategic, accretive acquisitions. I particularly want to thank members of the Steering Committee and their advisors for their hard work and perseverance in coming to this mutually beneficial outcome.”

The Debenture Amendments were effected by the exchange of the outstanding $37,049,000 principal amount of unsecured convertible debentures for new, secured convertible debentures, which were issued to existing debentureholders in three equal, separate series (each, a “Series”): (a) 8.50% Series A Secured Debentures Due June 30, 2024 (the “Series A Debentures”), (b) 8.50% Series B Secured Debentures Due June 30, 2026 (the “Series B Debentures”), and (c) 8.50% Series C Secured Convertible Debentures Due June 30, 2028 (the “Series C Debentures” and, collectively with the Series A Debentures and the Series B Debentures, the “New Debentures”).

As previously disclosed, the interest rate will remain at 8.5%, but there is no mandatory cash interest payment for between 24 and 30 months as interest will initially be paid-in-kind with additional New Debentures (the “PIK Interest”) reducing near-term debt servicing requirements.  

In addition, an aggregate of approximately $2.4 million principal amount of Series C Debentures were issued in payment of the consent fee (the “Consent Fee”) payable to debentureholders who consented in favour of the extraordinary resolution approving the Debenture Amendments, which Consent Fee is subject to withholding for non-residents of Canada.

Following the closing of the Debenture Amendments, the following New Debentures are issued and outstanding on the following terms:

New Debenture	Initial Principal Amount		Maturity Date	Conversion Price
Series A Debentures	$12,349,666		June 30, 2024	$0.25
Series B Debentures	$12,349,666		June 30, 2026	$0.30
Series C Debentures	$14,736,279		June 30, 2028	$0.35

* Inclusive of Consent Fee.

The New Debentures were issued on a private placement basis and are subject to a statutory hold period of four months and one day commencing on the date of issuance of the New Debentures in accordance with applicable Canadian securities laws. The New Debentures will bear a legend reflecting the foregoing restriction on resale. The Company has applied to list each Series of the New Debentures on the Toronto Stock Exchange (“TSX”), and such listing is expected to occur following the expiration of the statutory hold period, subject to the satisfaction by the Company of customary listing conditions.

The New Debentures are secured against certain assets of the Company, but are fully subordinated to the Company’s existing senior secured debt. The Company is not entitled to incur further senior secured indebtedness, subject to certain exceptions including to fund working capital, capital expenditures, and strategically accretive acquisitions.

The New Debentures are governed by the terms of an amended and restated debenture indenture dated June 27, 2022 between the Company and Computershare Trust Company of Canada, as debenture trustee (the “Amended and Restated Indenture”), as supplemented by the first supplemental indenture dated June 27, 2022 governing the terms of the Series A Debentures (the “Series A Supplemental Indenture”), a second supplemental indenture dated June 27, 2022 governing the terms of the Series B Debentures (the “Series B Supplemental Indenture”) and a third supplemental indenture dated June 27, 2022 governing the terms of the Series C Debentures (the “Series C Supplemental Indenture” and, collectively with the Series A Supplemental Indenture and the Series B Supplemental Indenture, the “Supplemental Indentures”). Copies of the Amended and Restated Indenture and Supplemental Indentures will be made available in due course under the Company’s profile on SEDAR at www.sedar.com.

For Investor & Media Relations:

Matthew Sale, CFO
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com

About Aleafia Health:

Aleafia Health, a vertically integrated and federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history, and operates a strategically located distribution centre, all in the province of Ontario. The Company produces a diverse portfolio of cannabis derivative products including oils, capsules, edibles, sublingual strips, and vapes, for sale in Canada in the adult-use and medical markets and is pursuing opportunities in select international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.

Forward Looking Information

This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, 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 information involves 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 information contained in this news release. 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 risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information 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. The forward-looking information 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 to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.

FAQ

What is the impact of the debenture amendments on Aleafia Health's liquidity?

The debenture amendments provide Aleafia Health with an increased liquidity of up to $11.6 million for working capital and growth initiatives.

When do the new debentures mature?

The new debentures mature in three series: Series A due June 30, 2024, Series B due June 30, 2026, and Series C due June 30, 2028.

What is the interest rate for the new debentures issued by Aleafia Health?

The interest rate for the new debentures is set at 8.5%.

How will Aleafia Health utilize the $11.6 million in liquidity?

The liquidity will be used to fund working capital, capital expenditures, and other growth initiatives.

What is the structure of the new debentures issued by Aleafia Health?

The new debentures are secured and issued in three series, with maturities staggered over a six-year period.