Clever Leaves Holdings Inc. (Nasdaq: CLVR) closed on $25 million in financing from Catalina LP, an affiliate of SunStream Bancorp Inc., a joint venture initiative sponsored by Sundial Growers Inc. (Nasdaq: SNDL). Clever Leaves also repaid the outstanding principal amount of the secured convertible notes due March 30, 2022. Clever Leaves also recently joined the Russell Microcap Index at the end of June.
SunStream’s $25 Million Infusion of Capital
Clever Leaves reported that it issued a secured convertible note to SunStream with an interest rate of 5.0% per year and a three-year maturity. Interest on the Convertible Note is payable on a quarterly basis, either in cash or by increasing the principal amount on the Convertible Note, at the Company’s election. SunStream may convert the principal and accrued interest on the Convertible Note into Clever Leaves’ common shares, without par value, at a price of $13.50 per share. Under this conversion feature, up to $12.5 million in aggregate principal on the Convertible Note may be converted within one year of issuance, subject to certain additional limitations.
“We are always looking at ways to optimize our financing arrangements, and we are grateful to receive this support from SunStream, which is a testament to the strength of our industry relationships and value proposition. Further, this financing meaningfully strengthens our balance sheet and reflects our commitment to opportunistically pursue value creation opportunities for our shareholders,” said Kyle Detwiler, CEO of Clever Leaves. “This financing immediately adds value to our shareholders by reducing existing indebtedness, reducing pro forma cash interest expense, and improving our liquidity with which to finance our growth. The combination of the SunStream Convertible Note and the repayment of the 2022 Convertible Notes created approximately $2.8 million of value through the discounted repayment, as well as cash interest savings of approximately $0.6 million through the previous maturity of the 2022 Convertible Notes or approximately $1.0 million per year when comparing the pro forma annual run-rate cash interest costs. With this financing, we expect to have greater flexibility to pursue new strategic growth opportunities, including new partnerships and acquisitions. We remain dedicated to being disciplined stewards of capital, and we look forward to further developing our partnership with SunStream over time.”
Repayment of 2022 Convertible Notes
As part of the announcement, Clever Leaves said it fully repaid its 2022 Convertible Notes, and the 2022 Convertible Notes were discharged. The aggregate amount paid represented the sum of 90.0% of the aggregate $27.8 million outstanding principal amount owing under the 2022 Convertible Notes, accrued interest through July 19, 2021, and legal fees.
Last month Clever leaves said it had entered into an active pharmaceutical ingredient supply agreement with CBD Life Holding SAPI de CV, an emerging leader in the Mexican cannabis industry which offers a line of CBD Wellness and consumer products and medical cannabis products that are under development. The partnership is Clever Leaves’ first commercial agreement in the Mexican market, and it comes shortly after regulations were fully approved in the country, providing a strategic growth opportunity in one of the world’s largest pharmaceutical markets. According to a recent report from Prohibition Partners for Latin America and the Caribbean (2020), the medical cannabis market in Mexico could be worth $60 million by 2024. So, it isn’t a huge market by comparison to the U.S. or Canada but still holds many opportunities.
“As a multinational cannabis operator with substantial operations in Latin America, it has always been one of our top goals to identify leaders in the region and build long-lasting commercial relationships,” said Detwiler. “CBD Life’s brand positioning and local exposure are attractive, but it’s their commitment to high-quality, pharmaceutical-grade medical cannabis products that make this an ideal partnership.”