CALGARY, AB – High Tide Inc. has entered into binding subscription agreements with arm’s length institutional credit providers for aggregate gross proceeds of $15 million in a subordinated debt financing.
“I am very excited to announce that we have signed definitive agreements for an aggregate of $15 million in debt financing, plus a $10 million accordion feature. We have discussed publicly how we believe we are underleveraged, with our gross debt representing less than one times our 12-month trailing Adjusted EBITDA1, and could stand to benefit from obtaining more debt to continue fueling our rapid store expansion across Canada,” said Raj Grover, Founder and Chief Executive Officer of High Tide.
“I believe we have found the sweet spot with this financing, which demonstrates how we prudently manage our balance sheet. We have secured a commitment for $15 million in debt, of which $5 million will not be drawn for several months. By structuring the financing this way, we have secured the additional funds, but avoid paying interest on the remaining $5 million until drawn, as we don’t require the funds imminently given our strategic growth plans and strong free cash flow profile. Further, this financing includes a $10 million accordion feature, which we may pursue should it make sense to do so. Given the turbulence in the cannabis retail landscape in Canada, with several of our peers having recently filed for creditor protection, this financing is yet another sign that the market believes in the strength of our business and the creditworthiness of our Company. On that front, I look forward to sharing more with the release of our Q2 2024 results after the close of markets today, and on our earnings conference call tomorrow morning,” added Mr. Grover.
FINANCING DETAILS
Pursuant to the Financing, the Company will complete an offering of $1,000 principal subordinate secured debentures of the Company for aggregate gross proceeds of $15,000,000 at a price of $900 per Debenture, representing a 10% original issue discount. The Debentures will mature on the date that is 60 months from the date of issuance and shall bear interest at a fixed rate of 12% per annum on drawn amounts, payable quarterly.
Pursuant to the terms of the subscription agreements, the funds will be drawn in two tranches: (i) $10,000,000 at closing and (ii) $5,000,000 in November 2024. The Final Tranche, until drawn, will be subject to a 1% per annum standby fee.
On closing of the Initial Tranche, the Company will issue to each Lender their pro rata share of an aggregate of 230,760 common shares in the capital of the Company at a deemed price of $3.47 per Common Share, representing the 10-day volume weighted average price of the Common Shares on the TSX Venture Exchange ending on June 11, 2024.
It is anticipated that the Debentures will be governed by the terms and conditions of a debenture trust indenture to be entered into by the Company and Olympia Trust Company, in its capacity as trustee and collateral agent. The Company will reserve the right to redeem the Debentures at any time prior to maturity, in whole or in part, upon sixty days’ notice and payment of certain penalties. The obligations under the Debentures will be collaterally secured by general security and guarantee agreements from the Company and certain subsidiaries of the Company and will rank in second position to the Company’s existing senior lender.
The Company plans to use the proceeds from the Financing to repay the remaining balance of its outstanding convertible debentures (currently less than $1,000,000) and will use the remaining proceeds for ongoing development of the Company’s business model and general working capital purposes.
The Financing is expected to close on or prior to June 30, 2024, and is subject to certain conditions including, but not limited to, the receipt of certain closing deliverables, the satisfaction of certain conditions precedent and the receipt of all necessary regulatory and stock exchange approvals, including the approval of the TSXV.
Echelon Capital Markets is acting as financial advisor to High Tide in connection with facilitating the Financing.
All Debentures and Common Shares issued pursuant to the Financing will be subject to a statutory hold period of four months plus one day from the date of issuance in accordance with applicable securities legislation in Canada and restrictions on resale in the United States with applicable U.S. restrictive legends as required pursuant to the United States Securities Act of 1933, as amended.
ABOUT HIGH TIDE
High Tide, Inc. is the leading community-grown, retail-forward cannabis enterprise engineered to unleash the full value of the world’s most powerful plant and is the second-largest cannabis retailer in North America by store count2. High Tide (HITI) is uniquely-built around the cannabis consumer, with wholly-diversified and fully-integrated operations across all components of cannabis. High Tide consistently moves ahead of the currents, having been named one of Canada’s Top Growing Companies in 2021, 2022 and 2023 by the Globe and Mail’s Report on Business Magazine, and was named as one of the top 10 performing diversified industries stocks in both the 2022 and 2024 TSX Venture 50. High Tide was also ranked number one in the retail category on the Financial Times list of Americas’ Fastest Growing Companies for 2023. For investment performance, don’t miss the High Tide profile pages on SEDAR+ and EDGAR.
