iAnthus Secures Additional Financing And Makes Changes To Its Board Of Directors

iAnthus Capital Holdings, Inc. ITHUF IAN has completed its recapitalization transaction pursuant to the terms of a restructuring support agreement, dated July 10, 2020 and as amended June 15, 2021, between the company, all of the holders of the 13% senior secured convertible debentures issued by iAnthus Capital Management, LLC ("iAnthus SubCo"), and a majority of the holders of the 8% unsecured convertible debentures issued by the company.

Issuance of New Common Shares

As of the closing of the recapitalization transaction, the company issued in aggregate 6.07 billion common shares to the secured lenders and holders of the unsecured debentures. Specifically, the secured lenders have been issued in aggregate 3.03 billion common shares on a pro rata basis, which is equal to 48.625% of the total outstanding common shares, and the holders of unsecured debentures have been issued in aggregate 3.03 billion on a pro rata basis, which is also equal to 48.625% of the total outstanding common shares. The existing holders of the common shares will continue to hold in aggregate 171.72 million common shares, representing 2.75% of the total outstanding common shares.

All of the company's existing warrants and options have been cancelled as of the closing of the recapitalization transaction.

Restructured Secured and Unsecured Debt

As of the closing of the recapitalization transaction, the secured debentures, and the interim financing secured notes due July 13, 2025 issued to certain of the secured lenders in connection with the entry into of the restructuring support agreement, were forgiven in part and exchanged in accordance with the terms of the plan of arrangement for: the secured lender shares; 8% senior secured debentures in the aggregate principal amount of $99.74 million, due June 24, 2027, issued by iAnthus SubCo and guaranteed by the company and its subsidiaries; and 8% unsecured debentures due June 24, 2027, issued by iAnthus SubCo and guaranteed by the company in the aggregate principal amount equal to $5 million.

As of the closing of the recapitalization transaction, the unsecured debentures were also forgiven in part and exchanged in accordance with the terms of the plan of arrangement for: the unsecured debenture holders shares; and new unsecured notes in the aggregate principal amount equal to $15 million. Interest accrued under both the new secured notes and new unsecured notes shall be paid in kind.

$25 Million Additional Financing

Following the closing of the recapitalization transaction, certain of the secured lenders and consenting unsecured debenture holders acquired 8% senior secured debentures in the aggregate principal amount equal to $25 million, due June 24, 2027 by iAnthus SubCo and guaranteed by the company and its subsidiaries. Interest accrued under the additional secured notes shall be paid in kind. The proceeds from the issuance of the additional secured notes will be used by the company for working capital and general corporate purposes, and for costs and expenses relating to the closing of the recapitalization transaction.

Changes to the Board of Directors

Michael Muldowney and Diane Ellis have resigned from the board. Robert Galvin, interim CEO and a director has also resigned from the board but continues as interim CEO.

The secured lenders nominated two of their three nominees to the board, being Scott Cohen and Michelle (Mich) Mathews-Spradlin, and will nominate a third director after closing, subject to regulatory approval where required. The consenting unsecured debenture holders nominated all three of their director nominees being: Zachary (Zach) Arrick, Alexander Shoghi and Marco D'Attanasio. These nominees will serve as directors of iAnthus until the next annual general meeting or until their successors are duly elected or appointed.

Annual General Meeting

The company has called its annual general meetings ("AGM") of shareholders for the fiscal years 2019, 2020 and 2021 for shareholders of record on July 5, 2022, to be held concurrently on August 11, 2022, in Toronto, Ontario.

Petition Seeking Annual General Meeting

Michael Weisser commenced a petition in the Supreme Court of British Columbia, Vancouver Registry, under Court File No. S-224955 against iAnthus and its board of directors on June 20, 2022. In the petition, Weisser seeks, among other things, an order that the company hold its 2020 AGM on or before June 30, 2022, or alternatively on a date set by the court as soon as reasonably possible thereafter. In the petition, Weisser alleges he became a shareholder of the company in approximately June 2021, exercising control or direction, together with supporting shareholders, over approximately 5% of the shares of the company. On June 22, 2022 Weisser was granted short leave, permitting a return date for the petition on June 28, 2022. The company will respond to the petition. The recapitalization transaction has now closed and the company has noticed the AGMs; accordingly, Weisser's petition is moot.

Long-Term Incentive Program

On January 7, 2022, the company announced the terms of a long-term incentive program ("LTIP") recommended by the compensation committee of the board and, pursuant to which, the company will allocate to certain employees of the company and its subsidiaries restricted stock units and option awards under the amended and restated omnibus incentive plan dated October 15, 2018 in order to attract and retain such employees. The awards will represent up to, in the aggregate, 5.75% of the fully-diluted equity of the company after taking into account the issuance of the common shares under the recapitalization transaction. The allocations were contingent on the closing of the recapitalization transaction and, subject to approval of the Canadian Securities Exchange and the board, the company intends to issue such restricted stock units and stock options within ten days. The LTIP covers approximately 250 employees of the company and its subsidiaries.

Additional Agreements

In connection with the issuance of the new secured notes and the additional secured notes, the company and its subsidiaries entered into the third amended and restated secured purchase agreement with the secured lenders and consenting unsecured debenture holders, and in connection with the issuance of the new unsecured notes, the company and iAnthus Subco entered into an unsecured debenture agreement with the secured lenders and consenting unsecured debenture holders.

In connection with the restructuring transaction, the company and certain of the secured lenders and consenting unsecured debenture holders entered into a customary investor rights agreement and a customary registration rights agreement.

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