On Thursday, Tilray consented to purchase about $211 million of HEXO’s debt, allowing the Canadian cannabis manufacturer to select a considerable equity stake in its troubled adversary.
The agreement allows HEXO to possess more advantageous debt repayment conditions, possibly saving the company from years of a financial crisis.
HEXO shares listed in the US were approximately 17% higher in pre-market trading.
Chair of HEXO’s board, Mark Attanasio, said, “HEXO has endured a crippling overhang for the past twelve months, due to punitive redemptions and discounted dilutive financings, and we needed to solve this issue in order to make positive progress.”
HEXO announced the previous year of issues with its senior secured convertible notes released on May 27 and added it might not have sufficient money coming in to sustain paying off the debt.
The most recent agreement offers Tilray at least $20 million (Canadian dollar) in interest payments in the initial year, attaching around four additional cents per share to future earnings and $50 million (Canadian dollar) of cost savings, to be distributed equally with HEXO, within two years of the execution of the deal.
The notes, which Tilray will buy from recent creditor HT Investments MA LLC, would be revised to authorize Tilray to execute conversion rights for $0.90 (Canadian dollar) per HEXO share and procure a considerable equity ownership position in HEXO in the future.
HEXO stated the previous month that it would restructure its board, immediately in effect, as a move under a deal with activist stockholder Adam Arviv and his fund, Kaos Capital, for issues over its falling share price.