Delta 9 Cannabis Inc DLTNF

New Credit Facility Announcement

[johnabo]

Delta 9 Announces Commitment Letter for $32 Million Non-Dilutive Credit Facility

WINNIPEG, MB – February 1, 2022 – DELTA 9 CANNABIS INC. (TSX: DN) (OTCQX: DLTNF) (“Delta 9” or the “Company”) today announced that it has entered into a binding commitment letter (the “Commitment Letter”) with connectFirst Credit Union Ltd. (“connectFirst”) for $32 million in credit facilities (the “Proposed Credit Facilities”). The Proposed Credit Facilities would be offered to the Company through First Calgary Financial, a division of connectFirst.

"With this debt financing, Delta 9 has added financial flexibility to optimize its capital structure and is well positioned to continue to execute its growth strategy" said John Arbuthnot, CEO of Delta 9. "This transaction reflects the strong financial and operating results, which Delta 9 and its team have been able to produce in the wake of cannabis legalization in Canada, and confidence from our new senior lender, connectFirst. To our knowledge, this interest rate is among the most competitive rates established by any public cannabis company to date.”


Financing Highlights:
Total Capital and Extended Maturity: The Proposed Credit Facilities include a $23 million commercial mortgage facility (“Facility 1”), a $5 million acquisition facility, and a $4 million authorized overdraft. Facility 1 matures after 5 years and amortizes over a 12-year term. Facility 1 is anticipated to be established in multiple tranches advancing at various times for purposes including:

• $11.2 million for the repayment of existing long-term debt.
• $11.8 million for the repayment of the Company’s 8.5% unsecured convertible debentures due July 17, 2022 (the “Convertible Debentures”).

Lower Interest Rate: The interest rate under the Proposed Credit Facilities is a 5-year fixed rate of 4.55% per annum for Facility 1 and connectFirst prime + 1.50% per annum for the authorized overdraft. This reflects a blended interest rate reduction of approximately 1.37% versus the Company’s current long term credit facilities and an interest rate reduction of approximately 3.95% versus the Convertible Debentures. The combined interest rate reductions under Facility 1 represent approximately $550,000 in annualized interest savings for the Company.

Improved Liquidity and Cash Flows: The Proposed Credit Facilities would result in approximately $1.2 million in additional operating capital on closing and an additional $470,000 in annualized principal repayment reductions. The proceeds would be used for continued growth and general working capital requirements.

Dedicated Acquisition Capital: The Proposed Credit Facilities would also provide access to up to $5 million in capital to fund a potential future accretive acquisition. The Company plans to accelerate its growth plans through acquisitions of EBITDA positive cannabis businesses in Canada.

Debt Financing and Repayment of CWB and Convertible Debenture:
The Company expects to repay its credit facilities with its current bank lender as a part of its closing with connectFirst. The Company expects to repay its $11.8 million of Convertible Debentures on or before the maturity date of July 17, 2022.