HEXO Corp announces $70 million private placement of convertible debentures led by Directors, CEO, and long-term shareholders...
October 23 2019 - 12:28PM
HEXO Corp (“HEXO” or the “Company”) (TSX:HEXO; NYSE:HEXO) today
announced that it has entered into subscription agreements with a
group of investors pursuant to which the investors have agreed to
purchase, on a private placement basis, $70 million principal
amount of 8.0% unsecured convertible debentures of the Company (the
“Debentures”). The Company has also announced that in light of the
financing and additional time required to finalize its year end
filings, the Company has rescheduled the release of its fourth
quarter and full year ended July 31, 2019 financial results to
October 28, 2019 and its earnings call to discuss these results to
8:30 a.m. EDT on Tuesday, October 29, 2019 (details below). All
amounts are expressed in Canadian dollars.
The group of investors includes, but is not
limited to, Sebastien St-Louis, CEO and co-founder of HEXO Corp, as
well as Board members Dr. Michael Munzar, Vincent Chiara, Nathalie
Bourque and Adam Miron.
“The confidence in HEXO Corp that this $70
million private placement demonstrates is a testament to the value
the Company is expected to bring to shareholders,” said Sebastien
St-Louis, CEO and co-founder of HEXO Corp. “We remain focused on
garnering significant market share, driving growth, and in shaping
this company into a mature, resilient and valued leader in our
industry.”
The Debentures will bear interest from the date
of closing at 8.0% per annum payable quarterly and will mature on
the date which is three years from issuance. Following the date
which is one year from issuance, the Debentures will be convertible
at the option of the holder into common shares of the Company at
any time prior to maturity at a conversion price of $3.16 per share
(the “Conversion Price”), subject to adjustment in certain
events.
“It is important to note the one-year
anti-dilution feature in this arrangement, meaning that the
financing does not dilute current shareowners’ ownership of the
Company in the short term,” added St-Louis.
Beginning on the date which is one year from
issuance, the Company may force the conversion of all of the
principal amount of the then outstanding Debentures at the
Conversion Price on not less than 30 days’ notice should the daily
volume weighted average trading price of the common shares of the
Company be greater than $7.50 for any 15 consecutive trading
days.
At any time on or before the date which is one
year from issuance, the Company may repay all, but not less than
all, of the principal amount of the Debentures, plus accrued and
unpaid interest.
Upon any repayment of the principal amount of
the Debentures, the Company shall have the right to satisfy the
repayment of the principal amount, together with all accrued and
unpaid interest thereon, through the conversion of such amounts
into common shares of the Company at the Conversion Price.
Upon a change of control of the Company, holders
of the Debentures will have the right to require the Company to
repurchase their Debentures, in whole or in part, on the date that
is 30 days following the giving of notice of the change of control,
at a price equal to 115% of the principal amount of the Convertible
Debentures then outstanding plus accrued and unpaid interest
thereon (the “Offer Price”). If 90% or more of the principal amount
of the Convertible Debentures outstanding on the date of the notice
of the change of control have been tendered for redemption, the
Company will have the right to redeem all of the remaining
Debentures at the Offer Price.
The Debentures and any common shares of the
Company issuable upon conversion thereof will be subject to a
statutory hold period lasting four months and one day following the
closing date.
The Company intends to use the net proceeds of
the private placement for working capital and general corporate
purposes.
Closing of the Offering is expected to occur on
or about November 15, 2019. The private placement is subject
to certain conditions including, but not limited to, the receipt of
all necessary regulatory and stock exchange approvals, including
the approvals of the Toronto Stock Exchange and the New York Stock
Exchange.
It is anticipated that certain insiders of the
Company will purchase approximately $8.676 million principal amount
of the Debentures under the private placement. These purchases will
be considered to be “related party transactions” pursuant to
Multilateral Instrument 61-101 – Protection of Minority Security
Holders in Special Transactions (“MI 61-101”). The Company will be
exempt from the requirements to obtain a formal valuation or
minority shareholder approval in connection with the participation
of these insiders in the private placement in reliance of sections
5.5(a) and 5.7(1)(a) of MI 61-101.
Webcast DetailsDate: October
29, 2019Time: 8:30 a.m. EDTWebcast:
https://event.on24.com/wcc/r/2112048/C13DC676CE53A5FD2CEB4095D0FF4A3AReplay
information: A replay of the call will be accessible by telephone
until 11:59 a.m. EDT on November 12, 2019.Toll Free Dial-In Number:
1-888-390-0541.Replay Password: 531469#
About HEXO Corp
HEXO Corp is an award-winning consumer packaged
goods cannabis company that creates and distributes innovative
products to serve the global cannabis market. Through its hub and
spoke business strategy, HEXO Corp is partnering with Fortune 500
companies, bringing its brand value, cannabinoid isolation
technology, licensed infrastructure and regulatory expertise to
established companies, leveraging their distribution networks and
capacity. As one of the largest licensed cannabis companies in
Canada, HEXO Corp operates with 2.4 million sq. ft of facilities in
Ontario and Quebec. The Company is also expanding internationally
and has a foothold in Greece to establish a Eurozone processing,
production and distribution centre. The Company serves the Canadian
adult-use markets under its HEXO Cannabis and Up Cannabis brands,
and the medical market under HEXO medical cannabis. For more
information please visit hexocorp.com.
Forward-Looking Statements
This press release contains forward-looking
information and forward-looking statements within the meaning of
applicable securities laws (“forward-looking statements”).
Forward-looking statements are based on certain expectations and
assumptions and are subject to known and unknown risks and
uncertainties and other factors that could cause actual events,
results, performance and achievements to differ materially from
those anticipated in these forward-looking statements.
Forward-looking statements should not be read as guarantees of
future performance or results. A more complete discussion of the
risks and uncertainties facing the Company appears in the Company’s
Annual Information Form and other continuous disclosure filings,
which are available on SEDAR at www.sedar.com and EDGAR at
www.sec.gov. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. The Company disclaims any intention or
obligation, except to the extent required by law, to update or
revise any forward-looking statements as a result of new
information or future events, or for any other reason.
Investor Relations:
Jennifer Smith
1-866-438-8429
invest@HEXO.com
www.hexocorp.com
Media Relations:
Caroline Milliard
(819) 317-0526
media@hexo.com
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