Cannabis producer Tilray to buy rival HEXO's debt of up to $211 million
Reuters
Published Mar 03, 2022 08:51AM ET
(Reuters) - Tilray (NASDAQ:TLRY) Brands on Thursday agreed to buy up to $211 million of HEXO (NASDAQ:HEXO)'s debt, giving the Canadian cannabis producer a right to pick a significant equity stake in its troubled rival.
The deal gives HEXO more favourable debt repayment terms, potentially rescuing the company from years-long financial turmoil.
U.S-listed shares in HEXO were about 17% higher in pre-market trading.
"HEXO has endured a crippling overhang for the past twelve months, due to punitive redemptions and discounted dilutive financings, and we needed to solve this issue in order to make positive progress," said Mark Attanasio, chair of the HEXO's board.
Last year, HEXO disclosed its ongoing concern with its senior secured convertible notes issued on May 27 and noted it may not have enough cash coming in to help pay off the debt.
The latest deal provides Tilray with about C$20 million in interest payments in the first year, adding about 4 cents per share to future earnings, and C$50 million of cost savings, to be shared equally with HEXO, within two years of the completion of the deal.
The notes, which would be purchased by Tilray from current debt holder HT Investments MA LLC, would be amended to permit Tilray to exercise conversion rights at a price of C$0.90 per HEXO share and acquire a significant equity ownership position in HEXO in the future.
Last month, HEXO said it would refresh its board, effective immediately, as part of a deal with activist shareholder Adam Arviv and his fund, Kaos Capital, over concerns over its sliding share price.
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Written By: Reuters
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