The cannabis company has entered into a binding term sheet with Maynbridge Capital for a senior secured first lien credit facility of up to $41.7 million
The Green Organic Dutchman Holdings Ltd () (OCTMKTS:TGODF) announced Friday it has arranged a credit facility of nearly $42 million.
The Ontario-based cannabis company said it has entered into a binding term sheet with Maynbridge Capital Inc for a senior secured first lien credit facility of up to $41.7 million.
The facility replaces a proposed mortgage loan as well as the sale and leaseback of TGOD’s Ancaster Energy Centre, both of which are no longer being pursued by the company.
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The facility consists of a committed $26.7 million senior secured term main loan with an 18-month term, comprising 12 monthly interest-only payments followed by six monthly payments of principal and interest, with the principal component based on a 15-year amortization. It also includes an additional uncommitted $15 million senior secured term accordion loan, with terms to be agreed between the lender and the company.
The interest rate on the main loan will be 13% per annum, secured by a first lien against all assets of the company and its material subsidiaries.
TGOD will issue 7,000,000 common share purchase warrants to the lender, subject to standard adjustment provisions, on the date of closing of the loan. Each warrant being exercisable to acquire one common share for 36 months from the closing of the transaction at an exercise price of $1.00 per warrant.
Upon closing of the main loan, expected on December 20, TGOD will receive $26.7 million. A further $15 million may be made available by the lender under the accordion loan upon the lender's credit approval and the achievement of certain operating and financial milestones that need to be agreed upon, which the company expects to achieve near the end of the third quarter of 2020.
The gross proceeds of $26.7 million to be received on closing - which includes the financed portion of $1.7 million - compares to the combined total of $26 million that was expected in the first tranches of the mortgage loan and the sale and leaseback previously being considered by TGOD.
In addition, the company pointed out that the interest-only payments under the main loan in the first-year amount to only $3.5 million in cash outflow, compared to $7.1 million in cash outflow for interest and lease payments that would have been due under the mortgage loan and the sale and leaseback agreement.
TGOD said the new lending arrangement represents a net positive for committed cash flow. It said does not consider the difference in amounts from the accordion loan expected later in 2020 to impact the viability of the production ramp-up to operating cash flow by the second quarter of 2020.
Established by Dutch founders, the company grows organic cannabis in high-technology, eco-friendly and sustainable facilities. The cannabis is grown naturally in Canadian soil without the use of synthetic pesticides, herbicides or fertilizers and wrapped in eco-friendly packaging.
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