High Tide Inc.HITI HITI 2LYA, announced Thursday that it has entered into binding subscription agreements with arm’s length institutional credit providers for total gross proceeds of CA$15 million ($10.9 million)in a subordinated debt financing.
“I am very excited to announce that we have signed definitive agreements for an aggregate of CA$15 million in debt financing, plus a CA$10 million accordion feature," stated Raj Grover, founder and CEO of High Tide. "We have discussed publicly how we believe we are underleveraged, with our gross debt representing less than one times our 12-month trailing Adjusted EBITDA, and could stand to benefit from obtaining more debt to continue fueling our rapid store expansion across Canada.”
Financing Highlights
The Alberta-based cannabis company will complete an offering of CA$1,000 principal subordinate secured debentures of the company for total aggregate gross proceeds of CA$15 million at a price of CA$900 per debenture, representing a 10% original issue discount. The debentures will mature on the date that is 60 months from the date of issuance and shall bear interest at a fixed rate of 12% per year on drawn amounts, payable quarterly.
Under the subscription agreements, the funds will be drawn in two tranches: 1) CA$10 million at closing and 2) CA$5 million in Nov. 2024. The final tranche, until drawn, will be subject to a 1% per year standby fee.
On closing of the first tranche, the company will issue to each lender their pro rata share of an aggregate of 230,760 common shares in the capital of the company at a deemed price of CA$3.47 per common share, representing the 10-day volume weighted average price of the common shares on the TSX Venture Exchange ending on June 11, 2024.
The Company plans to use the proceeds from the financing to repay the remaining balance of its outstanding convertible debentures (less than CA$1 million) and will use the remaining proceeds for ongoing development of its business model and usual working capital purposes.
The financing is expected to close on or prior to June 30, 2024 and is subject to certain conditions.
Echelon Capital Markets is acting as financial advisor to High Tide in connection with facilitating the Financing.
“I believe we have found the sweet spot with this financing, which demonstrates how we prudently manage our balance sheet. We have secured a commitment for $15 million in debt, of which $5 million will not be drawn for several months. By structuring the financing this way, we have secured the additional funds, but avoid paying interest on the remaining $5 million until drawn, as we don’t require the funds imminently given our strategic growth plans and strong free cash flow profile," Grover added.
Price Action
High Tide shares closed Wednesday market session 5.20% higher at $2.63 per share.
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