Organigram Holdings Inc., the parent company of Organigram Inc., a leading licensed producer of cannabis, announced that the Company has amended its credit agreement dated May 31, 2019, with Bank of Montreal (“BMO”) as lead arranger and agent as well as a syndicate including three other lenders (the “Credit Agreement Amendment”). The Credit Agreement Amendment modifies certain terms of the $115 million term loan (the “Term Loan”) and $25 million revolving credit facility.
The Credit Agreement Amendment: (i) extends the final draw deadline of the Term Loan to July 31, 2020; (ii) postpones the commencement of principal repayments on the Term Loan to November 30, 2020; (iii) adjusts certain financial ratios to be maintained by the Company both before and after November 30, 2021 (the “Conversion Date”); (iv) modifies the applicable margin pricing and standby fee terms to reflect current market conditions; and (v) removes the uncommitted option to increase the Facilities by an incremental $35 million.
As at the date hereof, Organigram has drawn $85 million of the Term Loan and pursuant to the agreed upon terms and conditions of the Facilities can continue to draw down up to $30 million through to July 31, 2020. Principal repayments on the Term Loan will commence on November 30, 2020 at a rate of 2.5% per quarter. The Revolver for general corporate and working capital purposes is available based on a percentage of trade receivables and is undrawn as at the date of this press release. The Company may, at its discretion, repay the balance of the Facilities without penalty, at any time. Subject to certain exceptions, funds raised by the Company after December 31, 2020 are required to be used to repay the Facilities.
The pricing of the Facilities continues to be a set margin, which before the Conversion Date will be fixed at 2.5% or 3.75%, over BMO’s Prime Based Loans or a Bankers’ Acceptance or equivalent rate based on the applicable term, respectively. After the Conversion Date, the margin may increase or decrease based on a pricing grid linked to the Company’s senior funded debt to EBITDA ratio as calculated at each quarter-end. Based on the current Bankers’ Acceptance benchmark rates and the margin in the pricing grid, the interest payable is expected to be in the range of 4.4% to 4.8% per annum.
In addition to the existing customary financial and restrictive covenants, the Company has agreed as part of the Amendment, to maintain an unrestricted cash balance of not less than $30 million at all times, $8 million of which has been deposited as cash collateral with BMO as security for the Facilities. The Facilities continue to be secured by the assets of Organigram, which primarily consist of the Company’s Moncton campus production facility.