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Zenabis Announces $25 Million in Additional Debt Financing and Extension and Partial Conversion of Secured Convertible Notes

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Zenabis Global Inc. (TSX: ZENA) (“Zenabis” or the “Company“) is pleased to announce that it has today signed definitive documentation with respect to $25,000,000 (the “New Senior Debt“) in new senior secured debt financing (the “Financing“) from R.C. Morris Capital Management Ltd. (“RCM“). The Financing has been effected by way of amending and restating the debenture representing senior secured debt in the principal amount of $25,000,000 provided by the existing senior lender (the “Original Senior Debt“, and together with the New Senior Debt, the “Senior Debt“), such that the amended and restated debenture (the “Amended and Restated Debenture”), in which RCM is now one of the lenders, now represents $50,000,000 in senior secured debt.

The New Senior Debt will bear interest at a rate of 14% per annum, calculated and payable monthly. The Senior Debt will have a maturity date of June 30, 2020. The Company will have the right to prepay any principal amount of the Senior Debt.

In connection with the New Senior Debt, the Company has paid certain customary fees, including a structuring fee to RCM in an amount equal to five percent of the New Senior Debt, and issued RCM warrants exercisable to acquire 902,514 common shares of the Company (each, a “Common Share“) at any time until August 21, 2022 at an exercise price of $1.38502 per Common Share. The exercise price was determined based on the five-day volume-weighted average price of the Common Shares on the TSX immediately preceding the date hereof.

Concurrently, the holders of the subordinated secured convertible notes (the “Convertible Notes“) of the Company have agreed to extend the maturity date of the Convertible Notes to June 30, 2020 and subordinate the Convertible Notes to the New Senior Debt. In consideration thereof, the conversion price of Convertible Notes has been reduced to $1.54635and the interest rate of the Convertible Notes has been increased to 11%. The Company will also have a right to prepay the Convertible Notes at any time on or after October 17, 2019. The holders of the Convertible Notes have also agreed to convert, effective today and at the new conversion price, 30% of the principal amount of the Convertible Notes, such that the aggregate outstanding principal amount of the Convertible Notes will be approximately $17.4 million. The Company has also issued the holders of the Convertible Notes warrants exercisable to acquire an aggregate of 1,373,712 Common Shares at any time until August 21, 2022 at an exercise price of $1.82 per Common Share.

“We are pleased to be strengthening our financial position through securing this additional senior debt, reducing the principal amount outstanding of our existing secured convertible notes, and extending the maturity date of our existing secured convertible notes,” said Andrew Grieve, Chief Executive Officer of Zenabis. “These developments ensure we have a surplus of capital to complete the expansion of our facilities to achieve an annual design capacity of 143,200 kg of dried cannabis and become cashflow positive upon completion of our current capital program. In addition, we note that Zenabis does not intend to raise incremental debt financing, raise convertible debt, or issue incremental equity capital in order to pursue the expansion of our cultivation capacity. Instead, the next priority of Zenabis is the replacement of the Senior Debt and the Convertible Notes with standard bank financing. Upon completion of a refinancing of the Senior Debt and the Convertible Notes and the transition to a permanent capital structure, Zenabis intends to publish leverage targets to provide for a predictable ongoing capital structure.

 

SOURCE Zenabis Global Inc.

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