Imperial Brands PLC Extends $123 Million Convertible Debenture and Defers Interest
Auxly Cannabis Group Inc. (OTCQX: CBWTF) announces amendments to its $123 million debenture agreement with Imperial Brands, extending the maturity date by 24 months to September 25, 2024. The amendments maintain the 4% annual interest rate, due upon maturity, and allow Imperial Brands to convert unpaid interest into common shares at the volume-weighted average trading price. This initiative aims to improve Auxly's cash flow and strengthen its balance sheet, enhancing growth potential as it seeks minority shareholder approval for these changes at the upcoming shareholder meeting.
- Debenture maturity extended by 24 months, improving cash flow.
- Maintained interest rate at 4%, due at maturity, supporting financial stability.
- Conversion of unpaid interest into shares could boost capital structure.
- Dependence on minority shareholder approval could delay implementation.
- Potential risks associated with market conditions affecting cannabis products demand.
This news release constitutes a "designated news release" for the purposes of the Company's prospectus supplement dated March 23, 2021 to its short form base shelf prospectus dated March 18, 2021.
TORONTO, April 19, 2021 (GLOBE NEWSWIRE) -- Auxly Cannabis Group Inc. (TSX.V - XLY) (OTCQX: CBWTF) ("Auxly" or the "Company"), a leading consumer packaged goods company in the cannabis products market, is pleased to announce an agreement with its strategic partner, Imperial Brands PLC (“Imperial Brands”) to amend certain provisions of its previously issued
Pursuant to the Amendments, Imperial Brands and Auxly have agreed to extend the maturity date of the Debenture by 24 months from September 25, 2022 to September 25, 2024.
The Amendments will also provide Imperial Brands with the right, on an annual basis, to convert any or all of the accrued and unpaid interest on the Debenture then outstanding into Common Shares (the “Interest Conversion Election”), at a conversion price equal to the five-day volume weighted average trading price of the Common Shares on the date that Interest Conversion Election is made. Auxly and Imperial Brands have also agreed that the interest rate under the Debenture, which currently accrues at a rate of
Lastly, the Amendments provide for the re-instatement of certain approval rights of Imperial Brands under the Investor Rights Agreement.
As a result of the Amendments, the Company will see a significant improvement to the near-term cash requirements of the business, enabling it to focus on executing on its business strategies that will position it for long-term growth to the benefit of its stakeholders.
“After the great progress we’ve made over our first year of commercial operations, including achieving the #1 position in the 2.0 market and breaking into the top 10 licensed producers by overall market share, this agreement to extend the debt maturity date for 24 months demonstrates the confidence Imperial Brands has in our strong growth and differentiated strategy,” said Hugo Alves, CEO of Auxly. “The extension and deferral of interest will improve our cash position, strengthen our balance sheet and remove potential overhang on the Company’s share price. I would like to thank our partners at Imperial Brands for their ongoing commitment to our Company and look forward to our continued relationship.”
Auxly remains Imperial Brands’ exclusive global partner for any future development, manufacture, commercialization, sale and distribution of cannabis products.
The Debentures are convertible into Common Shares at a price of
The implementation of the Amendments is subject to the satisfaction of a number of conditions, including, among other things, the approval of the TSX Venture Exchange, and minority shareholder approval of the Amendments in accordance with Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61-101”), as more particularly described below.
Related Party Transaction
Imperial Brands is considered a “related party” of the Company, and the Amendments constitute a “related party transaction”, as such terms are defined by MI 61-101. The Company is relying on an exemption from the formal valuation requirements of MI 61-101 available on the basis of the securities of the Company not being listed on specified markets prescribed by MI 61-101.
Pursuant to MI 61-101, the Amendments are subject to the approval by shareholders of the Company holding more than
ON BEHALF OF THE BOARD
"Hugo Alves" CEO
About Auxly Cannabis Group Inc. (TSX.V: XLY)
Auxly is a leading Canadian cannabis company dedicated to bringing innovative, effective, and high-quality cannabis products to the medical, wellness and adult-use markets. Auxly's experienced team of industry first-movers and enterprising visionaries have secured a diversified supply of raw cannabis, strong clinical, scientific and operating capabilities and leading research and development infrastructure in order to create trusted products and brands in an expanding global market.
Learn more at www.auxly.com and stay up to date at Twitter: @AuxlyGroup; Instagram: @auxlygroup; Facebook: @auxlygroup; LinkedIn: company/auxlygroup/.
Investor Relations:
For investor enquiries please contact our Investor Relations Team:
Email: IR@auxly.com
Phone: 1.833.695.2414
Media Enquiries (only):
For media enquiries or to set up an interview please contact:
Email: press@auxly.com
Notice Regarding Forward Looking Information:
This news release contains certain "forward-looking information" within the meaning of applicable Canadian securities law. Forward-looking information is frequently characterized by words such as "plan", "continue", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or information that certain events or conditions "may" or "will" occur. This information is only a prediction. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking information throughout this news release. Forward-looking information includes, but is not limited to: obtaining the necessary regulatory approval and Minority Shareholder Approval for the Amendments and the timing of such approvals; the anticipated benefits of the Amendments; the Company's execution of its product development and commercialization strategy; consumer preferences, political change, future legislative and regulatory developments involving cannabis and cannabis products; and competition and other risks affecting the Company in particular and the cannabis industry generally.
A number of factors could cause actual results to differ materially from a conclusion, forecast or projection contained in the forward-looking information in this release including, but not limited to, whether: the Company is able to obtain regulatory approval and Minority Shareholder Approval for the Amendments on the proposed terms and timeline; the expected benefits of the Amendments materialize in the manner expected, or at all; there is acceptance and demand for current and future Company products by consumers and provincial purchasers; and general economic, financial market, legislative, regulatory and political conditions in which the Company operates will remain the same. Additional risk factors are disclosed in the annual information form of the Company for the financial year ended December 31, 2019 dated May 13, 2020.
New factors emerge from time to time, and it is not possible for management to predict all of those factors or to assess in advance the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking information. The forward-looking information in this release is based on information currently available and what management believes are reasonable assumptions. Forward-looking information speaks only to such assumptions as of the date of this release. Readers should not place undue reliance on forward-looking information contained in this release.
The forward-looking information contained in this release is expressly qualified by the foregoing cautionary statements and is made as of the date of this release. Except as may be required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
FAQ
What is the significance of Auxly Cannabis Group Inc.'s recent debenture amendment?
How will the debenture amendment impact Auxly's financial position?
What is the current interest rate for Auxly's debenture with Imperial Brands?
When is the maturity date for Auxly's amended debenture?
What conditions must Auxly meet for the debenture amendments to take effect?
