Canopy Growth exchanges shares for $198M in debt

Canopy Growth exchanges shares for $198M in debt

Canopy Growth works a deal that causes mixed reactions among shareholders

When a company wishes to restructure its debt and equity mix to better position itself for long-term success, it may consider issuing a debt-for-equity swap. In the case of a debt-for-equity swap, all specified shareholders are entitled to exchange their shares for a predetermined amount of debt in the same company. Bonds are usually the type of debt offered. This is exactly the plan recently integrated by Canopy Growth, a big-name Canadian cannabis producer.

According to the latest updates, the firm has taken the decision to swap shares for $198 million of its debt. To do so, it has reached an agreement with noteholders to exchange that monetary amount of debt for stock and cash. As a result, it will be able to reduce a significant portion of its convertible debt, which is scheduled to mature in 2023.

The limited number of noteholders which includes parent company Constellation Brands completed a deal for Canopy to have the ability to acquire the outstanding 4.25% senior unsecured convertible notes due to mature in exchange for common stock and approximately $2.32 million in cash. This would mean that Constellation would own more of Canopy and other shareholders less.

“By addressing a substantial portion of our soon-to-mature convertible debt, we are deleveraging our balance sheet, preserving capital, and reducing interest payments by over C$10.9M annually,” Canopy Chief Financial Officer Judy Hong said in a statement. “These actions are critical as we navigate broader economic headwinds and will enable us to continue investing in the highest potential areas of our business to drive future growth.”

A company can swap shares for debt to avoid paying coupons and the face value of the debt in the future. Instead of having to pay a large amount of cash for debt payments, the company offers equity to debt holders. This is one good reason why Canopy has taken such action.



Social Media Auto Publish Powered By :