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Benzinga
Benzinga
Business
Vuk Zdinjak

Icanic Reveals Plans To Reduce Debt And Secure $2M Of Financing

Icanic Brands Company, Inc. (OTCQB:ICNAF) (CSE:ICAN) has entered into a restructuring support agreement with certain holders of its 2019 secured convertible debentures, to effect a proposed recapitalization transaction and secure financing of approximately $2.0 million arranged by insiders of the company.

The recapitalization transaction is the next step in the combination and integration of the Icanic and LEEF organizations following the closing of the merger of the companies on April 21, 2022. The recapitalization transaction will reduce the company’s outstanding indebtedness and debt service costs, improve its overall capital structure and result in an enhanced financial foundation for the company to allow it to move forward and execute upon its business plan. Assuming completion of the recapitalization transaction, the company’s pro forma outstanding indebtedness will be reduced from $14.5 million to approximately $10.9 million and its annual interest expense savings will be approximately $110,000.

The recapitalization transaction is expected to consist of the following key elements:

  • The 2019 secured convertible debentures, which matured on June 6, 2022, will be replaced with new 2022 secured convertible debentures as further described below.

  • The 2019 secured convertible debenture holders will receive, in cash, 25% of the aggregate of the principal and interest outstanding as at June 6, 2022.

  • The 2019 secured debenture holders will receive the new 2022 secured convertible debentures in an amount equal to 75% of the aggregate principal and interest outstanding as of June 6, 2022.

  • The 2022 secured convertible debentures will bear interest at an annualized rate of 11% per annum and will mature 24 months from the effective date of the recapitalization transaction;

  • The 2022 secured convertible debentures will be convertible into a unit of the company at a conversion price of CA$0.10 per unit, with each unit being comprised of one common share of the company and one warrant to purchase an additional common share of the company at a price per share of CA$0.15 for a period of 24 months from the date of conversion;

  • The company will issue additional secured convertible debentures to insiders of the company or certain strategic investors arranged by insiders of the company on the same terms as the 2022 secured convertible debentures for up to $2.0 million.

Subject to compliance with the restructuring support agreement, holders of the 2019 secured convertible debenture will forbear from exercising any rights or remedies in connection with any events of default under the 2019 secured convertible debenture trust indenture.

Commenting on the recapitalization transaction, Micah Anderson, CEO of LEEF stated, "The decline in the overall public equity cannabis markets, coupled with the extraordinary market conditions brought on by the pandemic and the delay we experienced in closing the Icanic transaction have resulted in some liquidity constraints for the company. The recapitalization transaction effectively allows our 2019 debenture holders to extend the term of their debenture on better terms with mechanisms in place that allow for significant upside as we continue to build our business. The objective of the company is to reduce its outstanding indebtedness and its annual interest costs, improve the company's overall capital structure, and most importantly, provide a stable financial foundation for the company to capitalize on the opportunities we have in front of us, which I believe to be very meaningful. The recapitalization transaction achieves all of these objectives and I look forward to its completion."

Photo by Alexander Schimmeck on Unsplash

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