Beleaguered cannabis rollup TILT Holdings Inc. (CSE: TILT) (OTCQB: TLLTF) closed a private placement of up to $35 million of senior secured notes from a syndicate consisting of existing shareholders and new investors. The company said that the first close was $25.6 million and any further closing of up to $9.4M would take place within 45 days.
Interest Rate Cut
The proceeds will be used specifically to retire in full TILT’s $20 million bridge loan dated April 29, 2019, that bears interest at 18.75% per annum, as well as other payables. This loan will have a maturity date of 36 months from the closing date and will bear interest from their date of issue at 8.0% per annum, payable quarterly.
TILT says it has agreed to change the Board of Directors with new independent Board members in line with new management’s focus on transparency, compliance and corporate governance. The lenders have proposed two Board Members who will be appointed shortly after closing.
“We are pleased to share that given our strong results and financial performance we have lowered the amount raised from our previous announcement and improved the terms resulting in significantly less dilutive financing for the Company. In a market where raising capital is challenging, this financing and these terms are a testament to our recent performance as a business and the support we have from our core shareholder base,” commented Mark Scatterday, the company’s interim CEO.
Mr. Scatterday further describes that “This loan demonstrates growing confidence in TILT’s value proposition as we seek to set ourselves apart with respect to profitable growth, free cash flow and resiliency in a dynamic industry. In a ‘grow for growth’s sake market,’ we are pleased to pair steady growth with principled financial discipline. Our goal is for TILT to become one of the top revenue-generating and profitable cannabis companies in the industry. We are excited to share our Q3 results in a few weeks.”
TILT said intends to use the proceeds to continue a rapid yet disciplined focus on profitability as one of the largest US-focused cannabis companies by revenue. Continuing to concentrate on the services side of the cannabis industry, capital will be allocated to help Jupiter continue its growth as one of the largest providers of vape hardware across the US and internationally, as well as the Baker and Blackbird software and distribution platforms. The statement said that it will also be strategically reviewing opportunities surrounding non-core assets.
In connection with the issuance of the Notes, the Company will issue 1,800 common share purchase warrants to the subscribers for each US$1,000 principal amount of Notes subscribed, for a total aggregate of approximately 46M Warrants (representing 45% warrant coverage on the aggregate gross proceeds of the Notes). Each Warrant is exercisable for one common share of the Company at a price of C$.33 per common share for a period of 36 months from the closing date.
In addition, the previous sellers of Jupiter Research LLC have agreed to restructure unsecured debt of $35 million (owed to them in connection with their sale of Jupiter) with a new maturity date of January 2023 and an 8% per annum interest rate that accrues and is payable at Maturity, along with a junior secured position to the Financing. Upon repayment of the Notes, should any Jupiter Debt be outstanding, the Jupiter Sellers will assume the same rights and security as the original Financing Syndicate until repaid. No warrants shall be issued as part of the Jupiter Debt Restructuring.