The funds raised will give TGOD a significant source of capital until it becomes cash flow positive, expected by end second quarter 2020
In a vote of confidence from its financial partners, () (OTCMKTS:TGODF) announced Thursday that it is raising up to C$103 million to fund its expansion in the Canadian recreational cannabis sector.
A portion of the proceeds will be used to complete construction at TGOD’s flagship Ancaster and Valleyfield Phase 1 facilities in eastern Canada.
The funds raised will also give TGOD a significant source of capital until the cannabis cultivator becomes cash flow positive, which the company expects by the end of the second quarter of 2020.
READ: Green Organic Dutchman unveils new strategic plan
"Our ability to raise capital, despite recent headwinds affecting the entire sector, is a clear show of confidence from our financial partners," said Brian Athaide, CEO of TGOD.
"It is reflective of the value of our significant assets, the trust investors are putting into TGOD's strong corporate governance, transparency and accountability, and the opportunity for the company's unique positioning to quickly capture and grow the organic segment."
TGOD’s Ancaster Facility is a 166,000 square foot campus with a 17,500 kilogram capacity. Funds raised will be used to complete the construction of the new processing area at the facility.
In Valleyfield, a 1.3 million square foot facility with six zones are nearing completion as part of the operation’s Phase 1 expansion. The capital will allow TGOD to complete construction of the six zones at the hybrid greenhouse and enclose the balance of the facility with the ability to expand production as the market develops, the company told investors.
Understanding terms
The new financing package consists of a definitive agreement for a sale-leaseback of the Ancaster Energy Centre, a construction mortgage loan term sheet and a convertible equity note term sheet.
The sale-leaseback agreement nets TGOD C$23 million in proceeds and carries a ten-year term, after which the company is able to repurchase the centre for one dollar. Closing of the agreement is subject to due diligence and documentation of a concurrent energy services agreement and operating agreement with the buyer, who TGOD names as an infrastructure investor.
The Toronto-based company also signed a term sheet with an investment fund for a C$40 million construction mortgage loan on the Ancaster and Valleyfield facilities. The terms include C$15 million payable on closing and a C$25 million additional advance available once certain milestones are hit.
The loan carries a 12% interest rate and an initial two-year term with the ability to extend.
The remaining capital will come by way of a US$30 million note with a 5% coupon from an investment fund, convertible into common shares of TGOD. Under its terms, TGOD would receive US$10 million upon closing and US$20 million in escrow, which would be released as the note is converted into shares.
TGOD will report its quarterly results after market on Thursday.
Contact Angela at [email protected]
Follow her on Twitter @AHarmantas
