- Canopy Growth stock (TSX:WEED) is poised for a rebound following a series of deleveraging and cash preservation measures
- The company expects to reduce its debt by approximately $437 million over the next two quarters as it carries out its business transformation plan
- Canopy Growth is a North American cannabis and consumer packaged goods company
- Canopy Growth stock (TSX:WEED) last traded at $0.85 per share
Canopy Growth stock (TSX:WEED) is poised for a rebound after a series of deleveraging and cash preservation measures.
These involve privately negotiated redemption agreements with certain holders of unsecured senior notes due July 15, 2023, as well as agreements with certain lenders under its term loan credit agreement dated March 18, 2021.
Highlights
- Total debt reduction: approximately $437 million over the next two quarters
- Annualized interest expense savings: approximately $20 million–$30 million
- Discount capture: Repayment of principal owing under credit agreement between 93 and 95 per cent of par
- Elimination of call premium: Canopy can now prepay remainder of loan at par
- Enhanced equity capitalization: Conversion of approximately 41 per cent of unsecured notes into common shares
After the redemption agreements, Canopy will preserve about $92 million in cash by settling some $193 million of the unsecured notes with 90.4 million common shares, $101 million in cash, and $40.4 million in newly issued unsecured non-interest bearing debentures convertible at $0.55.
The company will reduce $100 million of principal indebtedness under its credit agreement for $93 million in cash, with expected further principal reductions at $0.95 on the dollar upon completion of certain asset sales.
Management views these financial flexibility measures, coupled with its business transformation plan, as key to the sustainability of Canopy’s platform and its continued leadership in the North American cannabis market.
“We believe these latest milestones, in addition to actions Canopy Growth has taken to strengthen its balance sheet and its continued execution on the cost reduction program, will provide investors and all of our stakeholders with increased confidence in our path to long-term value creation,” Judy Hong, chief financial officer at Canopy Growth, said in a statement.
Additional balance sheet improvements in fiscal 2023
- Equitization of $366 million of its unsecured senior notes
- Paydown of $350 million (or 35 per cent of the principal) of its credit facility at $0.93 per dollar of debt
- Refinanced $100 million of unsecured senior notes held by Greenstar to extend maturity date to Dec. 31, 2024
- Generated $81 million in cash during the most recent fiscal quarter from the disposition of five facilities, with additional agreements in place for up to $150 million in proceeds by Sept. 30, 2023
Canopy Growth is a North American cannabis and consumer packaged goods company. Its brands include Doja, 7ACRES, Tweed, Deep Space, BioSteel and Martha Stewart CBD.
Canopy Growth stock (TSX:WEED) last traded at $0.85 per share.
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