TerrAscend (TER-Cse) Cdn$80.5 Million Financing Arrangement With Canopy Growth (WEED-T)
Mar 11, '20 - NR
TerrAscend today announced that TerrAscend Canada, its wholly owned subsidiary, has entered into a loan financing arrangement with Canopy Growth in the amount of Cdn$80.5 million (the "Loan") pursuant to a secured debenture (the "Debenture"). In connection with the funding of the Loan, TerrAscend has issued 17,808,975 common share purchase warrants to Canopy Growth (the "Warrants").
Canopy Growth initially invested in TerrAscend in November 2017 alongside funds managed by TerrAscend Chairman Jason Wild. TerrAscend has achieved considerable milestones since Canopy Growth initially invested, including becoming the first cannabis company licensed for sales in Canada, the United States, and Europe. Additionally, TerrAscend has expanded its capabilities and portfolio to include domestic and international cultivation, processing and distribution facilities; a growing retail footprint; and best-in-class brands, such as The Apothecarium and Ilera.
"TerrAscend has proven its ability to thrive in the global cannabis industry and this loan is a strong signal that Canopy Growth is confident in their ability to execute over the long term," said David Klein, CEO, Canopy Growth. "We are encouraged by TerrAscend's strong performance and we view the team's experience as an important contributor to its continued success."
"We are pleased to receive this loan from Canopy Growth as we enter the next stage of TerrAscend's growth and expansion," said Jason Ackerman, Executive Chairman and Interim CEO. "The Canopy Growth team recognizes our operational and management expertise, and this financing allows us to continue to fund and execute on our Canadian, U.S. hemp and international businesses while remaining focused on operations with high barriers to entry. We look forward to continuing to work with Canopy Growth as new opportunities emerge and the regulatory landscape evolves."
Use of Proceeds
The net proceeds are expected to be used by TerrAscend Canada for general corporate purposes and the funding of its Canadian operations, its Arise Bioscience U.S. hemp division, international expansion and the repayment of indebtedness. The funds cannot be used, directly or indirectly, in connection with or for any cannabis or cannabis-related operations in the United States, unless and until such operations comply with all applicable laws of the United States.
Transaction Overview
The Debenture will bear interest at a rate of 6.10% per annum and will mature on March 10, 2030 or such earlier date in accordance with the terms of the Debenture and all interest payments made pursuant to the Debenture are payable in cash by TerrAscend Canada. The Debenture is secured by the assets of TerrAscend Canada, is not convertible and is not guaranteed by TerrAscend. The Warrants are comprised of 15,656,242 common share purchase warrants (the "First Tranche Warrants") with each First Tranche Warrant entitling Canopy Growth to acquire one common share of TerrAscend at an exercise price of $5.14 per share, subject to adjustment in certain events and 2,152,733 common share purchase warrants (the "Second Tranche Warrants") with each Second Tranche Warrant entitling Canopy Growth to acquire one common share of TerrAscend at an exercise price of $3.74 per share, subject to adjustments in certain events. The Warrants will be exercisable by Canopy Growth following changes in U.S. federal laws permitting the cultivation, distribution and possession of marijuana or to remove the regulation of such activities from the federal laws of the United States. The First Tranche Warrants expire on March 10, 2030 or such earlier date in accordance with the First Tranche Warrants and the Second Tranche Warrants expire on March 10, 2031 or such earlier date in accordance with the Second Tranche Warrants.
The Canadian Securities Exchange ("CSE") has neither approved nor disapproved the contents of this news release. Neither the CSE nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.
About TerrAscend
TerrAscend provides quality products, brands, and services to the global cannabinoid market. As the first North American Operator (NAO), with scale operations in both Canada and the US, TerrAscend participates in the medical and legal adult use market across Canada and in several US states where cannabis has been legalized for therapeutic or adult use. TerrAscend was the first cannabis company with sales in the US, Canada, and Europe. TerrAscend operates a number of synergistic businesses, including The Apothecarium, an award-winning cannabis dispensary with several retail locations in California; Arise Bioscience Inc., a manufacturer and distributor of hemp-derived products; Ilera Healthcare, Pennsylvania's premier medical marijuana cultivator, processor and dispenser; and Valhalla Confections, a manufacturer of premium cannabis-infused edibles. TerrAscend holds a cultivation permit in the State of New Jersey and is pending approval for a vertically integrated medical cannabis operation with the ability to operate up to 3 Alternative Treatment Centers. Additionally, TerrAscend holds a Medical Cannabis Processor License in the State of Utah. For more information, visit www.terrascend.com.
Caution Regarding Cannabis Operations in the United States
Investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States. Cannabis remains a Schedule I drug under the US Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis in the United States. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable US federal money laundering legislation.
While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with medical or adult-use cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve TerrAscend of liability under U.S. federal law, nor will it provide a defense to any federal proceeding which may be brought against TerrAscend. The enforcement of federal laws in the United States is a significant risk to the business of TerrAscend and any proceedings brought against TerrAscend thereunder may adversely affect TerrAscend's operations and financial performance.
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