CannTrust Makes Proposal Under The Bankruptcy And Insolvency Act

CannTrust Holdings Inc. CNTTQ, a minority investor in Phoena Holdings Inc. has made a division I proposal pursuant to the Bankruptcy and Insolvency Act (Canada).

CTH had intended to hold its annual general meeting on or before November 30, 2022. However, in order to hold such annual meeting, CTH would be required to, among other things, prepare audited financial statements. CTH has determined that it is not feasible to complete the audit and other work necessary to hold an annual general meeting before November 30, 2022. In these circumstances, CTH believes it is in the best interests of its stakeholders to make a proposal to its creditors under the BIA.

The proposal is being funded by Phoena, with the support of Phoena's largest shareholder, Marshall Fields Holdings, a wholly-owned subsidiary of Kenzoll B.V., a Netherlands based private-equity company. Phoena's operations are not impacted by the restructuring of CTH. The proposal is also being supported by CTH's lenders.

Subject to satisfying certain conditions, including approval from creditors and obtaining an approval order for the proposal from the court, CTH intends to address its remaining liabilities, dispose of its residual assets, distribute its shares in Phoena and dissolve in advance of November 30, 2022 or as soon as practicable after that date.

CTH intends to distribute the shares it holds in Phoena to its existing shareholders, provided that, shareholders are required to hold at least 10,000 common shares of CTH in order to qualify for a distribution of Phoena common shares and any distribution of Phoena shares to a holder of CTH shares who is a person that is not Canadian or a U.S. person will be subject to CTH obtaining an opinion from qualified and independent securities counsel that such distribution is exempt from any requirement to prepare, file or deliver a prospectus or similar document.

The company is limiting the distribution of its Phoena Holdings shares to holders or owners of at least 10,000 CTH common shares so that the costs of distribution will not significantly exceed the value of the Phoena shares being distributed. When Phoena completed its private placement with Marshall Fields Holdings and the other strategic investors in March, 2022, they were issued common shares at a price of approximate $0.009 per share, implying that 10,000 shares had a value of $90.

Only those creditors to CTH with proven claims shall be entitled to attend the creditors meeting, vote on the resolution to approve the proposal and participate in any distributions contemplated by the proposal. To obtain further details about the claims procedure, the time and place of the creditors meeting and/or to get a proof of claims form and copy of the claims package, please visit the proposal trustee's website at http://www.ey.com/ca/canntrust. The proposal trustee will post additional relevant information and documentation related to these proceedings on its website as they become available.

The hearing date for court approval of the proposal will be scheduled after the creditors meeting, if the proposal is approved by the creditors at the creditors meeting. Details on the hearing date will be posted to the proposal trustee's website once available. Any person wishing to support or oppose the relief sought at the approval hearing may serve court materials on the service list setting out their basis for their support or opposition and/or attend the hearing. After considering the court materials filed by the proposal trustee, CTH and any other person, and hearing the submissions of those present at the hearing , the court may approve the proposal and other relief sought by CTH. If approved by the Court, CTH would then proceed to implement the proposal.

Phoena continues to explore strategic options to generate liquidity for its shareholders. The board's deliberations are ongoing and progressing but there can be no assurance that Phoena will ultimately be successful.

Photo: Benzinga; Sources: courtesy of jarmoluk and lindsayfox via Pixabay

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