CALGARY, AB , Jan. 14, 2022 /CNW/ - Decibel Cannabis Company Inc. (the " Company " or "Decibel ") (TSXV: DB) (OTCQB: DBCCF), a premium cannabis producer, is pleased to announce that it has entered into an amended and restated commitment letter with connectFirst Credit Union Ltd. (" connectFirst ") in respect of $54 million of debt capital (the " Committed Amount ") over an initial 5-year term. The Committed Amount is comprised of $40.5 million of term debt (the " Term Debt "), a $6.0 million authorized overdraft secured against government receivables (the " Authorized Overdraft "), and an accordion line of $7.5 million (the " Accordion Line " and collectively, the " Credit Facilities ").
The Company expects the proceeds combined with contributions from operations to provide sufficient liquidity to repay Decibel's convertible debentures on maturity.
"With this refinancing, Decibel has added financial flexibility to optimize its capital structure and is well positioned to continue to execute its aggressive growth strategy" saidStuart Boucher , Chief Financial Officer of Decibel. "This transaction reflects the strong position Decibel has established in the Canadian cannabis market and the continued confidence from connectFirst and our team in the execution of the Company's strategic plan".
Financing Highlights
- Access to $12 Million of Additional Term Debt: The Company's existing term debt will be increased by $12 million to $40.5 million , amortized over 12-years. The $12 million term debt will be accessible on request by Decibel. The Company expects the proceeds combined with contributions from operations to provide sufficient liquidity to repay Decibel's convertible debentures on maturity.
- Accordion for Future Growth: The Credit Facilities include a $7.5 million accordion to support future growth initiatives as Decibel continues to scale. The Accordion Line's initial availability is subject to Decibel achieving a trailing twelve month funded debt to EBITDA ratio of less than or equal to 4.00:1, as well as its maintained compliance with its other financial covenants (as further described below).
- Attractive Interest Rate: Decibel continues to receive industry leading interest rates that reflect the strength of its business:
| Term Debt | $40.5 million | 4.75% (5yr Fixed) |
| Authorized Overdraft | $6.0 million | Prime + 1.00% |
| Accordion | $7.5 million | Prime + 2.00% |
- Financial Covenants: The Credit Facilities will have one annually tested financial covenant, a debt to equity ratio of less than 1.00:1. Additionally, the Credit Facilities will have one quarterly tested covenant, a debt service coverage ratio of not less than 1.40:1, and a monthly current ratio covenant of not less than 1.25:1. Decibel's 12-month forecast projects compliance with all financial covenants.
The Company expects to close on the Committed Amount on or before January 31 , 2022, subject to compliance with financial covenants based on its 2021 draft annual financial results and satisfaction of other customary conditions precedent. Decibel expects to remain in compliance for the remainder of its twelve-month forecast period, as well as the 2021 annual covenants.
Link to Decibel's Investor Presentation