By Canopy Growth Corp (CGC, WEED) announced on Friday that it has reached agreements with its lenders to delever its balance sheet by a significant $437 million over the next six months. These agreements will not only help reduce the company’s debt but also lower its annual interest costs by $20 million to $30 million.
To further strengthen its financial position, the company plans to settle approximately $193 million aggregate principal of unsecured senior notes that are due on July 15. This will be done by using a combination of shares and non-interest bearing convertible bonds, allowing Canopy Growth to preserve approximately $92 million in cash.
Additionally, the company intends to reduce its principal indebtedness under its credit facility by $100 million through a cash payment of $93 million. It expects further reductions in principal at a discounted rate upon the completion of certain asset sales, with each dollar being reduced to 95 cents.
Canopy Growth has been facing challenges in generating profits in the Canadian cannabis market due to oversupply and a thriving black market. In fact, the company recently included going-concern language in its regulatory filing.
In light of these developments, Chief Financial Officer Judy Hong expressed confidence in the company’s long-term value creation. She stated, “We believe these latest milestones, in addition to actions Canopy Growth has taken to strengthen its balance sheet and its continued execution on the cost reduction program, will provide investors and all of our stakeholders with increased confidence in our path to long-term value creation.”
Canopy Growth will be filing its preliminary proxy statement later today for its 2023 annual shareholder meeting, which is scheduled for September 25. While the U.S.-listed shares experienced a premarket decline of 1.5%, they have seen a 71% decrease year-to-date. On the other hand, the AXS Cannabis ETF has fallen by 30%, while the S&P 500 has observed a 17% gain.
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