Cannabis multistate operator Ayr Wellness is revamping its significant corporate debt, announcing several steps that include:
- Extending by two years the maturity date of its senior notes due December 2024 in a deal under which Ayr will issue new shares.
- A commitment for $50 million in additional debt financing, which would result in $40 million in cash for Ayr “if funded.”
- Amending a promissory note with Nevada cannabis retailer LivFree Wellness, which Ayr acquired as part a 2019 qualifying transaction in 2019 by its predecessor SPAC.
Ayr’s latest move to address its debt comes after the company deferred paying $69 million in debt obligations earlier this year.
The deal to extend Ayr’s senior notes until December 2026 received the support of roughly 75% of the noteholders, Ayr said in a Thursday news release.
The old 12.5% senior notes will be swapped for 13% senior secured notes worth $243 million.
The holders of those new 13% notes will also get Ayr shares equal to 24.9% of Ayr’s post-closing share total, not counting 2.9 million existing warrants exercisable through May 2024 and “new anti-dilutive warrants” to be issued by Ayr.
The majority noteholders who supported the deal may also participate in Ayr’s issuance of new 13% senior notes of up to $50 million, at a 20% original issue discount, which could yield up to $40 million in cash for Ayr.
One noteholder will backstop the issuance of those so-called new money notes in exchange for a backstop premium, payable in shares worth 5.1% of Ayr’s outstanding shares.
“Proceeds of the new money notes will be used to restructure or repay senior notes and for working capital purposes,” Ayr said.
“In order to reduce the dilutive effect of the new shares and the backstop premium on existing shareholders,” the company said, existing shareholders will get anti-dilutive warrants to acquire up to 16.5% of the company’s outstanding shares, including the new shares being issued and the backstop premium.
Those warrants can be exercised at $2.12 per share for two years after closing.
“If fully exercised, the warrants would effectively dilute the new shares and the backstop premium from 30% to approximately 25% of the fully-diluted outstanding shares,” Ayr said.
The May 2019 LivFree Wellness promissory note was originally worth $20 million and matured in five years.
Under the amendment, Ayr will make a $3 million principal payment and defer the remaining $17 million of principal and $5 million of accrued paid-in-kind interest for two more years until May 2026.
The interest rate on the LivFree note will be increased from 6% to 10% annually and converted from paid-in-kind interest to monthly cash interest.
“Today’s announced agreements are the culmination of a series of actions taken in recent months to transform AYR’s balance sheet and protect the financial health of the company,” CEO David Goubert said in a statement.
Miami-based Ayr said it plans to close the transactions around Dec. 31 of this year, pending court and regulatory approvals.