VANCOUVER, BC, Feb. 19, 2021 /CNW/ - Zenabis Global Inc. (TSX: ZENA) ("Zenabis" or the "Company") announces that its wholly-owned subsidiary, Zenabis Investments Ltd. ("Zenabis Investments"), has filed a petition with the Supreme Court of British Columbia (the "Court") for a determination of the amount required to repay and terminate its fifth amended and restated debenture (the "Debenture") and to obtain discharges of the Debenture and related security. The Debenture is held by a subsidiary (the "Debenture Lender") of Sundial Growers Inc. ("Sundial"), another licenced cannabis producer and a competitor of Zenabis.
The purpose of the petition is to seek the Court's determination of the correct calculation of the amount required to exercise an option to buy out the amended royalty provided for in the Debenture (the "Amended Royalty") (which Zenabis contends is nil based on current facts and circumstances and the Debenture Lender asserts is $13.7 million), whether the Amended Royalty is secured by the same security charging the Debenture as well as related security (which the Debenture Lender contends and Zenabis Investments disputes), and whether certain prepayment amounts and default fees are payable under the Debenture (which the Debenture Lender contends and Zenabis Investments disputes).
As previously announced on January 22, 2021, the Company entered into a credit agreement (the "Credit Agreement") with a Canadian private debt fund, as agent on behalf of certain lenders (the "Facility Lenders"), in respect of a committed revolving credit facility in a principal amount of up to $60 million, subject to borrowing base requirements based on eligible receivables, inventory and real estate (the "Credit Facility"). The proceeds of the Credit Facility are intended to be used to prepay the Debenture, which has an outstanding principal balance of approximately $51.875 million, and for general corporate purposes. The obligation of the Facility Lenders to make advances under the Credit Facility, including the initial advance, is subject to the satisfaction of a number of conditions precedent, including, as is standard, payout and discharge of the Debenture and the related security. Regrettably, after several attempts, Zenabis Investments and the Debenture Lender are unable to agree on the amount required to prepay and terminate the Debenture (the "Payout Amount") and discharge the related security.
To date, all amounts owing to the Debenture Lender have been paid. In early January 2021, Zenabis Investments received notice from the Debenture Lender alleging a variety of defaults under the terms of the Debenture. None of the alleged defaults are for failure to make payments of principal or interest. As previously announced on January 6, 2021, the Company believes the Debenture Lender's allegations of default to be spurious and without merit and to have been an ill-disguised attempt to circumvent a fair and competitive process to acquire the Company by improperly foreclosing the equity of the Company or compelling Zenabis to enter into a transaction with Sundial.
Accordingly, Zenabis Investments has filed a petition with the Court to seek judicial determination of the Payout Amount, although there can be no assurances that the Court will rule in Zenabis' favour on all or any of the issues in dispute or that Zenabis will be able to access and draw down all or any amounts under the Credit Facility and prepay and terminate the Debenture and discharge all security thereunder.
Zenabis is a significant Canadian licensed cultivator of medical and recreational cannabis. Zenabis employs staff coast-to-coast, across facilities in Atholville, New Brunswick; Langley, British Columbia; and Stellarton, Nova Scotia. Zenabis currently has 111,200 kg of licensed cannabis cultivation space across three licensed facilities in Canada, together with its cannabis import, export and processing joint venture, ZenPharm, operating from Birżebbuġa, Malta.
The TSX has not reviewed and does not accept responsibility for the adequacy of the content of the information contained herein. This press release contains certain "forward-looking statements" and "forward-looking information" as defined under applicable Canadian securities laws. Forward-looking statements or forward-looking information involve risks, uncertainties and other factors that could cause actual results, performances, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward- looking statements or forward-looking information can be identified by words such as "anticipate", "intend", "plan", "goal", "project", "estimate", "expect", "believe", "future", "likely", "may", "should", "could", "will" and similar references to future periods. All statements other than statements of historical fact included in this release are forward-looking statements, including, without limitation, statements regarding the ability of Zenabis to drawdown amounts under the Credit Facility. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements or information. Important risks and factors that could cause actual results or events to differ materially from Zenabis' plans and expectations include availability of the Court, the outcome of the dispute over the Payout Amount, the Company's ability to fund the Payout Amount as determined by the Court, the satisfaction of the conditions precedent to the Facility Lenders' commitment to fund advances under the Credit Agreement and the timing thereof, including timely receipt of all required third party approvals, including TSX approval of the Commitment Shares, the termination of the Debenture and related security, the Facility Lenders' ability to fund advances under the Credit Facility, actual results of business negotiations, marketing activities, adverse general economic, market or business conditions, regulatory changes, risks relating to the COVID-19 pandemic, governmental responses thereto, measures taken by the Company in respect thereto and the impact thereof on the global economy, capital markets, the cannabis industry and the Company, and other risks and factors detailed herein and from time to time in the filings made by Zenabis with securities regulators and stock exchanges. Any forward-looking statement or information only speaks as of the date on which it was made and, except as may be required by applicable securities laws, Zenabis disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. Although Zenabis believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance or events, and accordingly, investors should not rely on such statements.
SOURCE Zenabis Global Inc.
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