VANCOUVER, BC, Jan. 22, 2021 /CNW/ - Zenabis Global Inc. (TSX:ZENA) ("Zenabis" or the "Company") is pleased to announce that it has entered into a credit agreement (the "Credit Agreement") with a Canadian private debt fund (the "Agent"), as agent on behalf of certain lenders, in respect of a committed revolving credit facility in a principal amount of up to $60 million, subject to borrowing base requirements based on eligible receivables, inventory and real estate (the "Facility").
Advances made under the Facility will bear interest at a rate per annum equal to the greater of 10% and the Toronto-Dominion Bank 's prime rate, from time to time, plus 7.55%, calculated daily and payable monthly. The Facility will have a maturity date of January 21, 2022 and may be extended for up to two additional periods of 180 days each with the mutual agreement of the Company and the Agent. The Facility will be secured against certain real and personal property of Zenabis and its subsidiaries.
The proceeds of the Facility will be used to repay the Company's outstanding secured debenture, which is currently held by an affiliate of Sundial Growers and currently bears interest at a rate of 14% per annum, and for general corporate purposes, including to finance working capital requirements. This refinancing of the secured debenture will substantially reduce the Company's interest costs.
Pursuant to the Credit Agreement, the Company has agreed to pay customary financing review and commitment fees. An additional customary commitment fee is payable upon any extension of the term of the facility. Any undrawn amounts of the Facility will bear a non-utilization fee at a rate of 2.40% per annum. The obligation of the lenders to make advances under the Facility, including the initial advance, is subject to the satisfaction of a number of conditions precedent. In addition to conditions to funding, the Credit Agreement contains customary affirmative, negative and financial covenants and customary events of default.
The Company has the right to terminate the Agreement upon 30 days' notice, including upon a refinancing or change of control, subject to the payment of a termination fee.
In addition to the cash fees, subject to the approval of the Toronto Stock Exchange (the "TSX") and the provisions of the Credit Agreement, the Company is required to issue to the Agent, on behalf of the lenders, at the time of the first advance under the Credit Agreement, as a partial commitment fee, 5,972,873 Zenabis common shares (the "Commitment Shares"). The Commitment Shares will subject to a hold period of four months plus one date following the date of issuance of the Commitment Shares. The issuance of the Commitment Shares is subject to the approval of the TSX.
Echelon Capital Markets is acting as exclusive financial advisor in the arrangement of this credit facility.
Shai Altman, CEO of Zenabis stated: "We are very pleased to announce this new credit agreement with our new financing partners. This committed revolving credit facility will enable the Company to substantially reduce its cost of capital while providing increased liquidity with which to finance Zenabis' continuing revenue growth and increase its operating flexibility. We'd also like to take this opportunity to thank Echelon Capital Markets for their assistance in arranging this credit facility".
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