Cannabis MSO Strikes Million-Dollar Debt Relief Deal, More Details Here

Author: Jelena Martinovic | November 01, 2023 10:38am

Vertically integrated multi-state cannabis operator AYR Wellness Inc. (CSE:AYR) (OTCQX:AYRWF) has entered into a transaction support agreement with the holders of approximately 75% of the aggregate outstanding principal amount of the company's 12.5% senior notes due December 2024.

The move follows the company's announcement in June 2023 of its entry into contingent agreements to defer principal or amortization payments for two years on an aggregate principal amount of approximately $69 million of its debt obligations owed to sellers of businesses previously acquired by the company.

The Miami-based company announced on Wednesday that under the deal:

• The existing senior Notes will be transferred to a newly formed CBCA subsidiary of AYR.
• The holders of the senior notes will receive an equal principal amount of 13% of senior notes issued by Newco in an aggregate amount of $243 million.
• The majority noteholders will be offered the opportunity to participate in the issuance of an additional 13% senior notes in an aggregate principal amount of $50 million, subject to a 20% original issue discount and concurrent with the completion of the exchange transaction;
• The offering of an additional 13% senior notes will be backstopped by one of the majority noteholders, in exchange for which such backstop party will, on closing, receive a backstop premium payable in the form of subordinated, restricted, or limited voting shares in the company representing in the aggregate 5.1% of the outstanding shares on a fully-diluted and pro-forma basis (or non-voting shares in one of the company's subsidiaries representing the equivalent value to 5.1% of the outstanding shares of the company on a fully-diluted and pro forma basis); and
• Recipients of the 13% senior notes will also receive new shares in an amount equal to 24.9% (excluding both the existing approximately 2.9 million warrants, which are exercisable until May 2024 at US$9.07 per share and the new anti-dilutive warrants) of the post-closing fully-diluted shares.
• The anti-dilutive warrants will be exercisable at $2.12 per share for a period of two years from the closing of transactions.

LivFree Wellness Agreement

The company also announced that it has agreed with LivFree Wellness, LLC, to amend specific terms of the promissory note dated May 24, 2019, executed in connection with its acquisition of LivFree.

The amendments to the LivFree Note will provide a principal payment of $3 million upon closing of the transactions and a deferral of the maturity of the remaining $17 million of principal and approximately $5 million of accrued PIK interest for a period of two years to May 24, 2026.

Why It Matters: 

Upon completion of the transactions and when combined with the previously announced contingent agreements with certain seller noteholders, AYR will have retired or extended the maturity of nearly $400 million in debt for an additional two years.

Upon completion of the transactions, AYR's senior noteholders and the backstop party will collectively receive equity representing 30% of the issued and outstanding shares of the company on a fully diluted and pro forma basis.

AYRWF Price Action

AYR Wellness' shares traded 1.5385% lower at $1.28 per share at the time of writing on Wednesday morning.

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Posted In: AYRWF CSE:AYR