Organigram Holdings Inc., the parent company of Organigram Inc, a leading licensed producer of cannabis, has closed its previously announced credit facility with Bank of Montreal as lead arranger and agent as well as a syndicate including three other lenders. The facility consists of a $115 million term loan and a $25 million revolving credit facility , both of which mature in May 2022. Included in the facility is an uncommitted option to increase the Facilities by an incremental $35 million to a total of $175 million, subject to agreement by BMO and satisfaction of certain legal and business conditions.
“The closing of this credit facility reflects BMO’s and the syndicate lenders’ vote of confidence in our management team, ability to deliver financial results, and investment in our world-class Moncton campus,” said Greg Engel, Chief Executive Officer. “Our current expansion plans are fully funded as we continue to remain on track for completion of Phases 4 and 5 of our campus.”
“As a Company we are always looking to optimize our capital structure and reduce our cost of capital,” remarked Paolo De Luca, Chief Financial Officer. “We have chosen not to access the public capital markets since our last financing in January 2018 in order to avoid dilution to our shareholders. This credit facility is only possible because of our focus on running a profitable and sustainable business with a disciplined spend that sets us apart amongst our peers.”
The Facilities are secured by assets of Organigram and its subsidiaries, which primarily consists of the Moncton campus production facility that is projected to be able to produce dried flower or equivalent cannabis of approximately 113,000 kg per year by the end of calendar year 2019 and will also house state of the art added-value manufacturing equipment, including the previously announced $15 million infrastructure investment to produce world class infused chocolate products. The proceeds of the term loan will be used to fund the Phase 4 and 5 expansions of the Moncton campus and refinance the Company’s existing long-term debt with Farm Credit Canada. The revolving credit facility may be used for general corporate and working capital purposes.
Pursuant to the agreed upon conditions of the Facilities, Organigram has initially drawn $50 million of the term loan on closing and can continue to draw down additional funds as required up to the $115 million term loan commitment through to November 30, 2019. Principal repayments on the term loan will commence on February 28, 2020 at a rate of 2.5%, or approximately $2.9 million, per quarter thereafter. The Company may, at its discretion, repay the balance of the Facilities without penalty, at any time.
The pricing of the Facilities is a set margin over the BMO’s CAD Prime Rate or a Bankers’ Acceptance rate based on the applicable term, which may increase or decrease based on a pricing grid linked to the Company’s debt to EBITDA coverage at each quarter-end. Based on the current Bankers’ Acceptance benchmark rates and the highest pricing level and margin in the pricing grid, the interest payable is expected to be in the high 4% to low 5% per annum range. The Facilities contain customary financial and restrictive covenants.
Organigram Holdings Inc. is a NASDAQ Global Select and TSX Venture Exchange listed company whose wholly owned subsidiary, Organigram Inc., is a licensed producer of cannabis and cannabis-derived products in Canada.
Organigram is focused on producing the highest-quality, indoor-grown cannabis for patients and adult recreational consumers in Canada, as well as developing international business partnerships to extend the company’s global footprint. Organigram has also developed a portfolio of legal adult use recreational cannabis brands including The Edison Cannabis Company, Ankr Organics, Trailer Park Buds and Trailblazer. Organigram’s primary facility is located in Moncton, New Brunswick and the Company is regulated by the Cannabis Act and the Cannabis Regulations (Canada).