Ms. Beena Goldenberg reports
SUPREME CANNABIS ANNOUNCES AGREEMENT TO PARTIALLY CONVERT AND AMEND DEBENTURES
The requisite majority holders of The Supreme Cannabis Company Inc.'s outstanding 6 per cent senior unsecured convertible debentures issued in October, 2018, have agreed to amend the terms of the debentures.
"We are pleased to have reached an agreement that significantly reduces the company's debt obligations and amends the debentures in advance of their original maturity in October, 2021," said Beena Goldenberg, president and chief executive officer of Supreme Cannabis. "This transaction offers holders of the debentures with an improved conversion rate that is aligned with current market conditions and affords our company additional flexibility and runway to accelerate revenue growth and achieve cost optimization as we continue on our path to near-term profitability."
The company has reduced the principal amount of the debentures by $63.5-million in exchange for the issuance of 116.6 million common shares, thereby converting debt to equity at a premium to the current share price. Holders of the debentures resident in eligible jurisdictions will receive one-half of the common shares as free-trading shares, and the other one-half of the common shares will be subject to a four-month restricted period. Holders of the debentures resident in other jurisdictions will be entitled to receive shares that are subject to restricted periods, subject to applicable securities laws.
The total principal amount of convertible debentures outstanding will be reduced from $100-million to $36.5-million, and the maturity date will be extended from Oct. 19, 2021, to Sept. 1, 2025, unless repurchased, redeemed or converted prior to maturity. The remaining debentures will accrete at a rate of 11.06 per cent per year, compounding on a semi-annual basis, commencing on Sept. 1, 2020, and ending on Sept. 1, 2023. The accreted portion of the principal is payable in cash, but does not bear cash interest and is not convertible into the company's common shares. The accreted portion of the principal will be evidenced by a separate series of debentures, which will not be listed on the Toronto Stock Exchange.
The conversion price of the remaining convertible debentures outstanding will be reduced from $2.45 per share to 28.5 cents per share, and annual interest payments will be reduced to $2.9-million from $6-million. The company will have the right to force the conversion of the remaining principal amount of the convertible debentures outstanding at the conversion price on no less than 30 days of notice if the daily volume-weighted average trading price of the company's common shares is greater than 45 cents for any 10 consecutive trading days. The principal amount of the remaining debentures will amortize at 1 per cent per month over the 24 months prior to maturity.
The amendments are expected to become effective no later than Sept. 1, 2020. The company will provide additional details concerning the applicable record dates and effective dates once all required approvals have been received and definitive documentation has been completed.
The amendments to the terms of the debentures remain subject to the approval of the TSX and standard closing conditions.
About The Supreme Cannabis Company Inc.
Supreme Cannabis Company is a global diversified portfolio of distinct cannabis companies, products and brands. Since 2014, the company has emerged as one of the world's most premium producers of recreational, wholesale and medical cannabis products.
Supreme Cannabis's portfolio of brands caters to diverse consumer and patient experiences, with brands and products that address recreational, wellness, medical and new-consumer preferences. The company's recreational brand portfolio includes: 7Acres, Blissco,
7Acres Craft Collective, Sugarleaf and Khalifa Kush Enterprises Canada. Supreme Cannabis addresses national and international medical cannabis opportunities through its premium Truverra brand.
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