Liquidity and Capital Resources Aargh. Beedie Capital as life preserver?
Liquidity and Capital Resources
On September 30, 2023, the Company had a working capital deficiency of $40.4 million compared to a working capital deficiency of $39.3 million on December 31, 2022. Of this deficiency on September 30 2023, $27.8 million relates to current long-term debt owed to the Bank of Nova Scotia and Beedie Capital that has a term ending in September 2024.
The Company is required to remain in compliance with certain monthly covenants under its Credit Facilities. The Company received a waiver from its lenders for certain of these covenants related to the period up to September 30, 2023 with which it would otherwise have not complied. During the period from January 1, 2023 until January 1, 2024, the covenants related to minimum EBITDA and maximum Secured Debt become more restrictive. On October 31, 2023, the Company determined that it was not in compliance with the Minimum Liquidity, Minimum EBITDA and the Secured Debt to Gross Profit covenants as set out in its Credit Facilities and could potentially be in non-compliance with certain of those covenants set out in the Bank of Nova Scotia Credit Facility and the Beedie Credit Facility in certain future months. As a result of these covenant concerns (the "Covenant Concerns"), the Company's lenders have the option to demand repayment of their debt. Although Management does not expect the Company's lenders to take this action, this possibility raises significant doubt about the Company's ability to continue as a going concern. To address the Covenant Concerns, o November 10, 2023 Think entered into an agreement with Beedie Capital to provide up to an additional $5M of convertible debt under its $25M facility. Think is also actively i) engaging in discussions with its lenders regarding waivers for Covenant Concerns as well as amendments to future covenants and ii) maintaining focus on Think's previously announced cost optimization program.
Although a positive outcome cannot be assured, based on preliminary conversations with Think's lenders and past experience, Management is optimistic for a successful resolution to the Covenant Concerns.