High Tide Inc. (NASDAQ:HITI) (TSXV:HITI) (FSE: 2LYA) announced the initial closing of its previously disclosed subordinated debt facility of $1,000 principal subordinate secured debentures of the company for aggregate gross proceeds of CA$15 million ($10.8 million) for CA$900 per debenture, under subscription agreements with arm's length institutional credit providers.

Details

The Canadian cannabis retail giant said the debentures will mature on July 31, 2029, and bear interest at a fixed rate of 12% annually on drawn amounts, payable quarterly.

Under the subscription agreements, the debentures will be drawn in two tranches, including the CA$10 million principal amount drawn on the initial closing and CA$5 million in November 2024. The final tranche, until drawn, will be subject to a 1% per annum standby fee.

The debentures are governed by the terms and conditions of a debenture trust indenture between High Tide and Olympia Trust company in its capacity as trustee and collateral agent. In addition, the company may redeem the debentures at any time before maturity, in whole or in part, upon sixty days' notice and payment of certain penalties as applicable.

In connection with the closing of the initial tranche, the company issued an aggregate of 230,760 common shares at a price of CA$ 3.47 per common share to the lenders.

Ventum Capital Markets is acting as financial advisor to the corporation in connection with arranging the facility, the company said in a press release.

Read Also: High Tide To Buy 'Highly Accretive' Cannabis Store For $438K

Why It Matters

The net proceeds of the facility will be used for debt repayment, ongoing development of the company's business model and general working capital purposes.

"I believe we have found the sweet spot with this financing, which demonstrates how we prudently manage our balance sheet," Raj Grover, founder and CEO of High Tide, said in June when the company first announced a debt financing deal. "We have secured a commitment for $15 million in debt, of which $5 million will not be drawn for several months. By structuring the financing this way, we have secured the additional funds, but avoid paying interest on the remaining $5 million until drawn, as we don't require the funds imminently given our strategic growth plans and strong free cash flow profile," Grover added.

HITI Price Action

High Tide's shares traded 4.62% lower at $1.65 per share during the pre-market session on Monday morning.

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