CannTrust Holdings Inc. has secured new investment partners, led by Marshall Fields International B.V., a subsidiary of Kenzoll B.V., a Netherlands-based private equity investment company.
The Ontario court of justice approved a proposed transaction pursuant to the companies creditors' arrangement act, along with an extension of its stay order until the earlier of March 25, 2022 or closing of the transaction, at which time the company expects to exit from its CCAA proceedings.
Under the proposed transaction, an investor group led by Marshall Fields has agreed to provide a $5.5 million debtor-in-possession loan to CannTrust Equity Inc. and CannTrust Inc. which will rank behind the company's existing $22.5 million DIP loan from Cortland Credit Lending Corporation.
The investors, including two members of the company's management team, will invest $11.2 million to acquire an approximately 90% equity interest in CannTrust Equity, with CannTrust Holdings retaining the balance of the equity in CannTrust Equity. The company's existing approximately $336 million inter-company loan to CannTrust Opco and the company's 50% equity interest in Cannabis Coffee and Tea Pod Company will be assigned to CannTrust Equity. Upon closing of the private placement, the investors will enter into a unanimous shareholders agreement. The company anticipates that the USA will provide for, among other things, an option, expiring 18 months after the closing date of the private placement, permitting the investors to elect to exchange their CannTrust Equity shares for a like number of CannTrust Holdings shares.
The exchange option will be exercisable by the investors only if, among other things, CannTrust Holdings obtains an order from the Ontario Securities Commission revoking the OSC's "failure-to-file" cease trade order dated April 13, 2020.
Revoking Cease Trade Order
CannTrust Equity intends to use the proceeds of the new DIP loan and the private placement for general working capital purposes to continue funding its growth strategy. Following closing of the private placement, in consultation with the new investor, the company intends to work towards applying to the OSC for an order revoking the cease trade order.
