HEXO Corp. Announces Early Conversion Option for Debentures
May 18 2020 - 12:44PM
HEXO Corp. (“
HEXO”, or the
“
Company”) (TSX: HEXO; NYSE: HEXO) today announced
that holders of $29.86 million aggregate principal amount of the
Company’s 8% unsecured convertible debentures maturing December 5,
2022 (the “Debentures”) have accepted an opportunity offered by the
Company to voluntarily convert all or a portion of their Debentures
for Conversion Units (as defined below) (the “Early Conversion
Option”).
The Company offered the Early Conversion Option to all holders
of the $70 million aggregate principal amount of the Debentures
(the “Debentureholders”), subject to acceptance by
Debentureholders (each an “Electing Debentureholder”) holding a
minimum of $20 million aggregate principal amount of the
Debentures by May 17, 2020. The Early Conversion Option was
limited to $30 million aggregate principal amount of the
Debentures being converted, with Electing Debentureholders for more
than this maximum amount being limited to converting their pro
rata portion of the $30 million aggregate principal amount of
Debentures to be converted.
Upon completion of the Early Conversion Option, Electing
Debentureholders will receive for the principal amount of their
Debentures to be converted, units of the Company (the “Conversion
Units”) issued at a price of $0.80 per Conversion Unit, instead
of Common Shares otherwise issuable on conversion of the
Debentures at the existing conversion price of $3.16 per share
or, at the option of the Debentureholders, at the market price at
the time of maturity, in each case as currently provided for
under the Debentures. Each Conversion Unit will consist of one
Common Share (a “Conversion Share”) and one-half of one common
share purchase warrant of the Company (each whole warrant, a
“Conversion Warrant”). Each Conversion Warrant will be exercisable
by the holder to purchase one Common Share (a “Conversion Warrant
Share”) at an exercise price of $1.00 per share for a period of
three years from issuance. The Conversion Shares will be subject
to restrictions against resale for a period of one year from
issuance as part of the terms of the Early Conversion Option. In
addition, the Conversion Warrants and Conversion Warrant Shares
will be subject to resale restrictions ending 4 months and one day
from issuance of the Conversion Warrants under applicable
securities laws. The implementation of the Early Conversion Option
and the issuance of the Conversion Shares, Conversion Warrants
and Conversion Warrant Shares is subject to the approval of the
Toronto Stock Exchange and the New York Stock Exchange.
The Company believes the completion of the Early Conversion
Option will provide the Company with balance sheet flexibility and
will reduce annual debt servicing costs for the Company.
The Early Conversion Option will not affect the rights of those
Debentureholders who have not accepted it. Debentureholders who
have not accepted the Early Conversion Option will not be entitled
to the benefit of the Early Conversion Option and will not
receive the Conversion Units issuable upon conversion of the
Debentures subject to the Early Conversion Option, and will retain
their full rights under the Debentures including their existing
conversion rights.
In the event that the conditions for the completion of the Early
Conversion Option are satisfied, it is expected that the
completion of the Early Conversion Option will occur on or about
May 25, 2020.
Certain insiders of the Company holding, directly or
indirectly, $7.92 million principal amount of Debentures have
accepted the Early Conversion Option, each of which constitutes a
“related party transaction” within the meaning of Multilateral
Instrument 61-101 - Protection of Minority Security Holders in
Special Transactions (“MI 61-101”). The issuance of the Conversion
Units to the insiders under the Early Conversion Option will be
exempt from the formal valuation and minority shareholder approval
requirements of MI 61-101, as the fair market value of the
Conversion Units issuable to, and the consideration payable by,
such persons does not exceed 25% of the Company’s market
capitalization.
No securities regulatory authority has either approved or
disapproved of the contents of this press release. This press
release is for information purposes only and shall not constitute
an offer to sell or the solicitation of an offer to buy, nor shall
there be any sale of these securities in any state or jurisdiction
in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any
such state or jurisdiction.
About HEXO
HEXO Corp is an award-winning consumer packaged goods cannabis
company that creates and distributes innovative products to serve
the global cannabis market. 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”),
including statements regarding the timing and completion of the
Early Conversion Option. 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, including that the Early Conversion Option may not be
completed on the terms indicated or at all. 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: (819) 317-0526
media@hexo.com
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