RE:Press Release: High Trail Waives Event of DefaultTwo points of clarity for everyone:
1. Deal with High Trail for the note purchase was non-binding. As a result, High Trail now has unlimited bargaining power with Hexo to extract value in exchange for the note sale.
2. Deal with Tilray for the note purchase and extension was non-binding. As a result, Tilray now has unlimited bargaining power with Hexo to extract value in exchange for the term extension.
That is why the waiver was required. Hexo is in default right now, is in forebearance, and there is no guarantee that they will get out. Tilray has every capacity to price chip at the moment as the share price falls for Hexo.
Reminder:
Transaction Details:
- Under the terms of the transaction, and subject to negotiation of the definitive documents and the satisfaction of specific conditions, Tilray Brands has agreed to acquire 100% of the remaining US$211.3 million outstanding principal balance of the Notes, all of which were originally issued by HEXO to HTI.
- As consideration for Tilray Brands’ purchase of the Notes, Tilray Brands will pay HTI 95% of the then current outstanding principal for the Notes (“Purchase Price”). Until closing, HTI may continue to redeem the Notes pursuant to their terms, however in no event shall the principal of the purchased Notes be less than US$182 million prior to the closing of the Transaction.
- Among the various amendments to be made to the Notes, the initial conversion price will be C$0.90 (subject to adjustments as set forth in the certificates for the Notes and the indenture governing the Notes), which, as of March 2, 2022, implies that Tilray Brands has the right to convert the Notes into approximately 37% of the outstanding common shares of HEXO (on a basic basis), inclusive of all equity issuances associated with the Transaction at closing. The Purchase Price will be satisfied in cash, common shares of Tilray Brands, or a combination thereof.
- In connection with the purchase of the Notes, Tilray Brands and HEXO intend to extend the maturity date by three years, to May 1, 2026, in order to provide HEXO with the flexibility and time to continue implementing its strategic “The Path Forward” growth plan.
Transaction Conditions
The Transaction is subject to a number of conditions, including (i) completion of all required amendments to the terms of the Notes; (ii) execution of definitive documentation relating to the Notes; (iii) receipt of approvals from the Toronto Stock Exchange and the Nasdaq Stock Market LLC, satisfactory to both HEXO and Tilray Brands, as applicable; (iv) Tilray Brands’ satisfactory completion of confirmatory financial due diligence; (v) receipt of all consents and approvals required by any regulatory authorities; (vi) final approval of the boards of directors of each of HEXO and Tilray Brands; (vii) receipt of shareholder approval from the HEXO shareholders; (viii) no material adverse effect having occurred in respect of HEXO; and (ix) receipt of all necessary approvals relating to the C$180 million committed equity line provided by KAOS.