- Amends $79.3 million syndicated
credit agreement
- Converts $73.2 million of term
debt and interest into convertible notes
- Issues US$18.0 million in
subordinated convertible notes
- Closes sale of Bridge Farm Group
- Cancels all previously issued shares and potential obligations
under the original Bridge Farm acquisition agreement
CALGARY, AB, June 8, 2020 /CNW/ - Sundial Growers Inc.
(Nasdaq: SNDL) ("Sundial" or "the Company") announced today that it
has completed four transactions as a part of its broader financial
restructuring. Sundial believes these transactions position it for
future success with reduced leverage, added flexibility and
improved liquidity. All amounts referred to are expressed in
Canadian dollars, unless otherwise specified.
"This announcement marks an exciting day for Sundial.
Financial flexibility and balance sheet health are critical
to our ability to execute on Sundial's operating strategy," said
Zach George, Sundial's Chief
Executive Officer. "With our improved capital structure and
streamlined operations, we have reduced our annual cash
obligations, including debt service costs, by more than
$50 million. Sundial is now in a much
better position to take advantage of the expected continuation of
the strong consumer demand and increased sales levels we have
experienced to date in 2020. This restructuring would not have been
possible without the constructive stance and professional approach
taken by our lenders. I want to thank our employees and
shareholders for their loyalty and support as we navigated through
this challenging process."
Summary of Net Debt (expressed in millions of Canadian
dollars):
|
Pre-Restructuring
|
Post-Restructuring
|
Senior Secured Credit
Facility
|
79.3
|
79.3
|
Term Debt
Facility
|
115.0
|
-
|
Second Lien
Convertible Notes
|
-
|
73.2
|
Subordinated
Convertible Notes (1)
|
-
|
24.3
|
Total
Debt
|
194.3
|
176.8
|
Total
Cash
|
15.2
|
33.2
|
Total Net Debt
(2)
|
179.4
|
143.6
|
Total Annual
Interest Expense
|
14.7
|
3.8
|
Total Annual Debt
Service
|
31.6
|
10.1
|
|
(1)
US$18.0 million face value
|
|
(2) Total
debt less total cash
|
Senior Secured Credit Facility Amendments for Added Financial
Flexibility
Sundial has entered into an agreement with its senior lenders to
amend and restate its syndicated senior secured credit agreement.
As a result of Sundial meeting all previous terms outlined by its
lenders, the Company received a waiver of its Q1 2020 covenants and
reduced financial covenants to comprise only a minimum cash balance
covenant of $2.5 million until
December 31, 2020 or later, and an
additional capital raise covenant of US$10
million by December 1, 2020.
Principal repayments of $2.1 million
per quarter have been rescheduled to commence on September 30, 2020.
$45 Million Debt Reduction and
Conversion of Remaining Term Debt for Second Lien Convertible Notes
and Warrants
In addition, the Company has extinguished (i) $45 million outstanding under its $115 million term debt facility (the "Term Debt
Facility") as part of the consideration in the Bridge Farm
disposition and (ii) $70 million,
plus $3.2 million in deferred
interest, outstanding under its Term Debt Facility in exchange for
the issuance of $73.2 million of
secured second lien convertible notes that bear no interest, mature
on June 5, 2022 and are convertible
into common shares at US$1.00 per
share, subject to adjustments. The conversion price of the
notes is subject to adjustment in the event the Company sells
shares of common stock or common stock equivalents for less than
US$1.00 per share in the future,
subject to customary excluded issuances. The Company also issued
17.5 million warrants with an exercise price of US$1.00 and 17.5 million warrants with an
exercise price of US$1.20, in each
case expiring on June 5, 2023 and
subject to adjustments, to the holder of the second lien
convertible notes. The holder will initially be restricted from
converting its notes into common shares and exercising its
warrants. The elimination of the Term Debt Facility will
result in $10.9 million in annual
interest expense savings.
Issuance of US$18 Million
Subordinated Convertible Notes and Warrants
Sundial issued US$18 million in
senior unsecured subordinated convertible notes (the "Subordinated
Convertible Notes Offering") with accompanying warrants to
institutional investors for proceeds, net of original issue
discount, placement agent's fees and other expenses, of
US$13.3 million.
The notes mature on June 5, 2022
and will not bear interest except in the case of default. The notes
are not secured by any assets of Sundial and are convertible into
Sundial common shares at the election of the purchasers at a price
of US$1.00 per share, subject to
adjustments. The conversion price of the Notes is subject to
adjustment in the event the Company sells shares of common stock or
common stock equivalents for less than US$1.00 per share in the future, subject to
customary excluded issuances. Sundial also issued warrants to
purchase 14,457,059 Sundial common shares to the purchasers with an
exercise price of US$0.9338 per
warrant. The warrants will expire 3.5 years from the date that the
underlying shares become freely tradable. The subordinated
convertible notes and associated warrants are immediately
exercisable. Net proceeds from the Subordinated Convertible Notes
Offering will be used for general corporate purposes.
Canaccord Genuity LLC and AltaCorp Capital Inc. acted as
placement agents for the Subordinated Convertible Notes Offering
and were issued an aggregate of 1,080,000 warrants to purchase
Sundial common shares at an exercise price of US$1.00 per warrant. The placement agents will
initially be restricted from exercising their warrants.
Sundial has provided customary registration rights with respect
to the common shares underlying the second lien convertible notes,
the subordinated convertible notes and warrants.
This press release is not an offer of securities for sale in
the United States. Securities may
not be offered or sold in the United
States absent registration or an exemption from
registration. Any public offering of securities to be made in
the United States will be made by
means of a prospectus that may be obtained from the Company and
that will contain detailed information about the Company and
management, as well as the Company's financial statements. The
Company intends to register some or all of the common shares
underlying the second lien convertible notes, the subordinated
convertible notes and warrants for sale in the United States.
Closing of Bridge Farm Group Sale
Sundial is also pleased to announce it has closed the sale of
its U.K. subsidiary, Bridge Farm Group ("Bridge
Farm") to a consortium of private investors that
includes former management of Bridge Farm (collectively,
the "Purchaser") for total consideration
of approximately $90 million (the "Bridge Farm
Disposition").
As consideration for the Bridge Farm Disposition, the Purchaser
will (i) assume $45 million of debt
under Sundial's former $115 million
Term Debt Facility, (ii) assume the contingent consideration
liabilities related to the remaining earn-out and additional share
obligations under the original Bridge Farm acquisition agreement,
dated as of July 2, 2019, and (iii)
cancel approximately 2,700,000 Sundial common shares currently held
by certain individuals affiliated with the Purchaser. Sundial
will not receive any cash consideration in connection with the
transaction.
About Sundial Growers Inc.
Sundial is a public company with Common Shares traded on Nasdaq
under the symbol "SNDL". Sundial is a licensed producer that crafts
cannabis using state-of-the-art indoor facilities. Our
'craft-at-scale' modular growing approach, award-winning genetics
and experienced master growers set us apart.
Our Canadian operations cultivate small-batch cannabis using an
individualized "room" approach, with 470,000 square feet of total
space.
Sundial's brand portfolio includes Top
Leaf, Sundial
Cannabis, Palmetto and Grasslands.
Our consumer-packaged goods experience enables us to not just
grow quality cannabis, but also to create
exceptional consumer and customer experiences.
We are proudly Albertan, headquartered in Calgary, AB, with operations in Olds, AB,
and Rocky View County, AB.
Forward-Looking Information Cautionary
Statement
This news release includes statements containing certain
"forward-looking information" within the meaning of applicable
securities law ("forward-looking statements"). Forward-looking
statements are frequently characterized by words such as "plan",
"continue", "expect", "project", "intend", "believe", "anticipate",
"estimate", "may", "will", "potential", "proposed" and other
similar words, or statements that certain events or conditions
"may" or "will" occur. Forward-looking statements may include,
without limitation, Sundial's future success with reduced leverage,
added financial flexibility and improved liquidity, its ability to
improve operations, expectations around it's balance sheet and
future debt levels including annual cash levels and debt servicing
costs and future consumer demand and sales levels. These
statements are only predictions. Various assumptions were used in
drawing the conclusions or making the projections contained in the
forward-looking statements throughout this news release.
Forward-looking statements are based on the opinions and estimates
of management at the date the statements are made,
and are subject to a variety of risks and uncertainties and
other factors that could cause actual events or results to differ
materially from those projected in the forward-looking statements.
The Company is under no obligation, and expressly disclaims any
intention or obligation, to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as expressly required by applicable
law.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/sundial-announces-successful-amendments-with-senior-lenders-us18-million-convertible-notes-issuance-and-close-of-bridge-farm-sale-301071752.html
SOURCE Sundial Growers Inc.