Canopy Growth Corporation (NASDAQ:CGC) (TSX:WEED) has closed its exchange transaction of certain 4.25% unsecured notes due 2023 in order to reduce its debt obligations by approximately CA$263 million (approximately $203.6 million). Constellation Brands, Inc. ("CBI") (NYSE:STZ), through its wholly-owned subsidiary Greenstar Canada Investment Limited Partnership ("GCILP"), participated in the transaction.
"As we navigate global economic and capital market headwinds, this action has enabled us to deleverage our balance sheet, preserve cash, and reduce interest payments by addressing a substantial portion of our 4.25% unsecured notes," stated Judy Hong CFO at Canopy Growth. "We continue to assess all available options to further optimize our balance sheet and address the remaining 4.25% unsecured notes in advance of their maturity to ensure Canopy Growth is well positioned to continue investing in the highest potential areas of our business to drive future growth."
Pursuant to the terms and conditions of the transaction, Canopy Growth acquired and cancelled approximately CA$263 million aggregate principal amount of its outstanding notes from a limited number of holders, including GCILP, a subsidiary of CBI, for an aggregate purchase price of CA$260 million (approximately $201.6 million) payable in common shares of the company.
Pursuant to the transaction, the company acquired and cancelled CA$100 million (approximately $77.5 million) aggregate principal amount of the notes held by GCILP in exchange for 29.24 million Canopy shares, representing approximately 6.7% of the issued and outstanding Canopy shares on a non-diluted basis immediately prior to the final closing. Upon completion of the transaction, CBI, though GCILP and CBG Holdings LLC, holds 171.5 million Canopy shares, representing approximately 35.7% of the issued and outstanding Canopy shares on a non-diluted basis.
GCILP's participation in the transaction is considered to be a "related party transaction" within the meaning of Multilateral Instrument 61-101 – Protection of minority security holders in special transactions ("MI 61-101").
In addition, the transaction was approved by the board of directors of the company with Judy A. Schmeling, a director of CBI, Garth Hankinson, CFO and executive vice president of CBI, Robert Hanson, executive vice president and president – wine & spirits division of CBI and James Sabia, executive vice president and president - beer division of CBI, each having disclosed their interest in the transaction by virtue of their positions with CBI and abstaining from voting thereon. The company did not file a material change report 21 days prior to the closing of the transaction as the details of the insider participation in the transaction had not been finalized at that time.
Photo by Giorgio Trovato on Unsplash
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