High Tide Executes Binding Subscription Agreements for $15 Million in Subordinated Debt
High Tide announced a $15 million subordinated debt financing agreement with institutional credit providers. The financing includes a $10 million accordion feature. The debt will be issued at a 10% original issue discount and bear an interest rate of 12% per annum. The funds will be drawn in two tranches: $10 million at closing and $5 million in November 2024. The proceeds will be used to repay outstanding convertible debentures and for business development. The financing is set to close by June 30, 2024, pending regulatory approvals.
- Secured $15 million in debt financing.
- Includes a $10 million accordion feature for potential future use.
- Debt to be drawn in two tranches to manage interest payments.
- Gross debt is less than one times trailing 12-month Adjusted EBITDA.
- Financing expected to close by June 30, 2024, pending regulatory approvals.
- Strong free cash flow profile maintained.
- The debentures bear a high-interest rate of 12% per annum.
- 10% original issue discount on the debentures.
- Issuance of 230,760 common shares could dilute existing shareholders.
- The remaining $5 million will incur a 1% standby fee until drawn.
- Obligations will be collaterally secured and rank second to senior debt.
Insights
High Tide's decision to secure $15 million in subordinated debt financing, along with a $10 million accordion feature, suggests strategic financial maneuvering aimed at supporting its growth trajectory. This financing approach ensures liquidity without immediate interest burden, which appears prudent given current market conditions.
Subordinated debt refers to loans or securities that are paid after other debts if the company falls into liquidation or bankruptcy. In this case, High Tide's subordinated debt has a fixed interest rate of
The structure, including the standby fee and the option to redeem the debentures early, offers flexibility but also hints at a careful balance of leveraging without overstretching financially. The transaction's terms, such as the original issue discount and the conversion of debentures to common shares, underline a deliberate attempt to manage cash flow while aligning stakeholders' interests.
For investors, this move signifies confidence in High Tide’s financial health and its strategic expansion plans. It’s important for investors to monitor how efficiently the raised capital is deployed and its impact on the company’s financial metrics over time.
In the context of the volatile cannabis retail market, this financing deal underscores High Tide’s ability to attract institutional credit. The company's decision to expand its store footprint amidst turbulent market conditions where many peers are seeking creditor protection indicates a strong belief in its market position and potential growth.
The inclusion of a $10 million accordion feature, which allows the company to access additional funds if needed, provides growth flexibility without immediate financial commitment. This strategic reserve could prove invaluable if market conditions improve or further opportunities arise.
From a market perspective, this move can be seen as a vote of confidence from institutional lenders, which may positively influence investor sentiment. However, the high fixed interest rate on the debentures and the potential dilution of shares due to the common share issuance should be carefully considered by shareholders.
Retail investors should weigh the potential for growth against the cost of this debt and the overall market conditions that might impact the cannabis sector.
Five-Year Debt Financing Provides More Fuel to Continue Growing While Remaining Free Cash Flow Positive
This news release constitutes a "designated news release" for the purposes of the Company's prospectus supplement dated August 31, 2023 to its short form base shelf prospectus dated August 3, 2023
"I am very excited to announce that we have signed definitive agreements for an aggregate of
"I believe we have found the sweet spot with this financing, which demonstrates how we prudently manage our balance sheet. We have secured a commitment for
FINANCING DETAILS
Pursuant to the Financing, the Company will complete an offering of
Pursuant to the terms of the subscription agreements, the funds will be drawn in two tranches: (i)
On closing of the Initial Tranche, the Company will issue to each Lender their pro rata share of an aggregate of 230,760 common shares in the capital of the Company ("Common Shares") at a deemed price of
It is anticipated that the Debentures will be governed by the terms and conditions of a debenture trust indenture to be entered into by the Company and Olympia Trust Company, in its capacity as trustee and collateral agent. The Company will reserve the right to redeem the Debentures at any time prior to maturity, in whole or in part, upon sixty days' notice and payment of certain penalties. The obligations under the Debentures will be collaterally secured by general security and guarantee agreements from the Company and certain subsidiaries of the Company and will rank in second position to the Company's existing senior lender.
The Company plans to use the proceeds from the Financing to repay the remaining balance of its outstanding convertible debentures (currently less than
The Financing is expected to close on or prior to June 30, 2024, and is subject to certain conditions including, but not limited to, the receipt of certain closing deliverables, the satisfaction of certain conditions precedent and the receipt of all necessary regulatory and stock exchange approvals, including the approval of the TSXV.
Echelon Capital Markets is acting as financial advisor to High Tide in connection with facilitating the Financing.
All Debentures and Common Shares issued pursuant to the Financing will be subject to a statutory hold period of four months plus one day from the date of issuance in accordance with applicable securities legislation in
This news release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction, nor shall there be any offer or sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The offer and sale of the securities has not been and will not be registered under the
ABOUT HIGH TIDE
High Tide, Inc. is the leading community-grown, retail-forward cannabis enterprise engineered to unleash the full value of the world's most powerful plant and is the second-largest cannabis retailer in
Bricks & Mortar Retail: Canna Cabana™ is the largest non-franchised cannabis retail chain in
Retail Innovation: Fastendr™ is a unique and fully automated technology that integrates retail kiosks and smart lockers to facilitate a better buying experience through browsing, ordering and pickup.
E-commerce Platforms: High Tide operates a suite of leading accessory sites across the world, including Grasscity.com, Smokecartel.com, Dailyhighclub.com, and Dankstop.com.
Brands: High Tide's industry-leading and consumer-facing brand roster includes Queen of Bud, Cabana Cannabis Co, Daily High Club, Vodka Glass, Puff Puff Pass, Dopezilla, Atomik, Silipipe, Evolution and more.
CBD: High Tide continues to cultivate the possibilities of consumer CBD through Nuleafnaturals.com, FABCBD.com, blessedcbd.de and blessedcbd.co.uk.
Wholesale Distribution: High Tide keeps that cannabis category stocked with wholesale solutions via Valiant™.
Licensing: High Tide continues to push cannabis culture forward through fresh partnerships and license agreements under the Famous Brandz™ name.
High Tide consistently moves ahead of the currents, having been named one of
Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release may contain "forward-looking information" and "forward-looking statements within the meaning of applicable securities legislation. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Company's current belief or assumptions as to the outcome and timing of such future events. The forward-looking statements herein include, but are not limited to, statements regarding: the expected size of the Financing, the aggregate amount of total proceeds that the Company will receive, the closing date of the Financing and the satisfaction of conditions precedent to the Financing, including receipt of all necessary regulatory and stock exchanges, the entering of the debenture trust indenture on the terms indicated herein, the Company's expected use of proceeds from the Financing, and the listing of Common Shares offered in the Financing. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements. Although the Company believes that the expectations reflected in these statements are reasonable, such statements are based on expectations, factors, and assumptions concerning future events which may prove to be inaccurate and are subject to numerous risks and uncertainties, certain of which are beyond the Company's control, including but not limited to the risk factors discussed under the heading "Non-Exhaustive List of Risk Factors" in Schedule A to our current annual information form, and elsewhere in this press release, as such factors may be further updated from time to time in our periodic filings, available at www.sedarplus.ca and www.sec.gov, which factors are incorporated herein by reference. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement and reflect the Company's expectations as of the date hereof and are subject to change thereafter. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, estimates or opinions, future events or results, or otherwise, or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law.
1 Adjusted EBITDA is a non-IFRS financial measure.
2 As reported by ATB Capital Markets based on store counts as of February 8, 2024
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SOURCE High Tide Inc.
FAQ
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