An anonymous director reports
FIRE & FLOWER FILES FOR CCAA PROTECTION
Fire & Flower Holdings Corp. and its subsidiaries, Fire & Flower Inc., 13318184 Canada Inc., 11180703 Canada Inc., 10926671 Canada Ltd., Friendly Stranger Holdings Corp., Pineapple Express Delivery Inc. and Hifyre Inc. (collectively, the Fire & Flower group), have received an order for creditor protection (the initial order) from the Ontario Superior Court of Justice (commercial list) under the Companies' Creditors Arrangement Act (CCAA).
As previously disclosed, the company has been actively pursuing additional financing to raise capital to finance its operations and, on May 26, 2023, engaged a financial adviser to assist the company with reviewing strategic options, including financing options. Following such review and after careful consideration of all available alternatives, and consultation with legal and financial advisers, the directors of the company determined that it was is in the best interests of the company to file an application for creditor protection under the CCAA.
The initial order includes, among other things: (i) a stay of proceedings in favour of the Fire & Flower group; (ii) approval of the DIP (debtor-in-possession) loan (as described below); and (iii) the appointment of FTI Consulting Canada Inc. as monitor of the Fire & Flower group.
The Fire & Flower group sought creditor protection under the CCAA in order to receive a stay of proceedings that will allow the Fire & Flower group to work with the monitor to facilitate the development of an orderly process designed to streamline its operations and conduct a court-supervised sales process to obtain a going concern solution for its operations and maximize the value of the Fire & Flower group's assets for the benefit of its stakeholders. The DIP loan (as described below) is anticipated to finance the operations of the Fire & Flower group in the ordinary course during this process.
The board of directors of the company will remain in place and management will remain responsible for the day-to-day operations of the company, under the general oversight of the monitor.
In order to finance the CCAA proceedings and other short-term working capital requirements, the Fire & Flower group has executed a facility agreement with 2707031 Ontario Inc. (the DIP lender), an affiliate of Alimentation Couche-Tard Inc. (ACT), pursuant to which the DIP lender has agreed to advance a debtor-in-possession loan in the amount of $9.8-million (the DIP loan). The continued availability of the DIP loan is conditional on, among other things, certain conditions being satisfied, including the initial order remaining in effect.
It is anticipated that the Toronto Stock Exchange will place the company under delisting review and there can be no assurance as to the outcome of such review or the continued qualification for listing on the TSX.
Each of ACT and the DIP lender is a related-party of the company and, accordingly, the DIP loan constitutes a related-party transaction of the company under Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions. Related-party transactions under MI 61-101 typically require a formal valuation and minority shareholder approval unless exemptions from these requirements are available. The DIP loan is not subject to the formal valuation requirement of MI 61-101. The company will rely on the exemption from the minority approval requirement contained in Section 5.7(d) of MI 61-101 (bankruptcy, insolvency, court order) in respect of the DIP loan. The company did not file a material change report more than 21 days before the expected closing of the DIP loan, as the details of the DIP loan were not finalized until immediately prior to the closing thereof and the company wished to close the DIP loan as soon as practicable for sound business reasons.
About Fire & Flower
Fire & Flower is a technology-powered, adult-use cannabis retailer with more than 90 corporate-owned stores in its network. The company leverages its wholly owned technology development subsidiary, Hifyre, to continually advance its proprietary retail operations model while also providing additional independent revenue streams. Fire & Flower guides consumers through the complex world of cannabis through education-focused, best-in-class retailing while the Hifyre digital retail and analytics platform empowers retailers to optimize their connections with consumers. The company's leadership team combines extensive experience in the technology, logistics, cannabis and retail industries.
Fire & Flower is a multibanner cannabis retail operator that owns and operates the Fire & Flower, Friendly Stranger and Firebird Delivery brands. Fire & Flower Holdings owns all issued and outstanding shares in Fire & Flower Inc. and Friendly Stranger Holdings Corp., licensed cannabis retailers that own and operate cannabis retail stores in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Yukon. Fire & Flower also has strategic licensing agreements for its brand and Hifyre digital platform in Canada and certain United States states.
For further information regarding the CCAA proceedings, you can refer to the monitor's website.
We seek Safe Harbor.
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