Sundial Inventory Falls On $100 Million Providing

Debra Borchardt


Sundial Growers Inc. (Nasdaq: SNDL) has priced an providing during which the corporate will obtain roughly $100 million. The underwritten providing is predicted to shut on February 2. The corporate stated it plans to make use of the cash for doable acquisitions of, or investments in, tools, services, belongings, fairness or debt of different companies, merchandise or applied sciences and for working capital and basic company functions. the inventory was dropping over 3% in early buying and selling to these days promote close to 79 cents.

Falling Income, Rising Losses

In November, Sundial reported that its third-quarter income fell 36% to only $15.5 million. The corporate additionally delivered a whopping web lack of $71.4 million. This was nearly double the a web lack of $32.8 million for the three months ending June 30, 2020. 

On the time Zach George, Sundial’s CEO stated, “Whereas our third-quarter income decreased, we’re happy with the demonstrated enchancment in working self-discipline, profitable price optimization initiatives and a cloth discount of our debt. Following the announcement of our monetary restructuring in June of this 12 months, we now have accelerated enhancements in our working practices concentrating on a sustainable price construction and a simplified enterprise mannequin that may higher allow us to give attention to delighting customers.”

He went on to say, “Having entered 2020 with a challenged capital construction, and a disparate enterprise mannequin, our crew has moved aggressively to focus our operations and product portfolio to get the perfect from our high-quality folks and belongings.”

Early in December, the corporate introduced it had pay as you go $50 million of the excellent principal underneath its senior secured non-revolving time period credit score facility to additional enhance its stability sheet. Then Sundial stated it had pay as you go the remaining excellent principal underneath its senior secured non-revolving time period credit score facility of $21.9 million and stated it had no debt excellent.

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Zenabis Acquisition

The corporate has been after Zenabis for the reason that finish of December when Sundial stated it had made a strategic funding in Zenabis’ senior lender, which Zenabis stated was an try and coerce Zenabis into being acquired by Sundial. In an announcement, Zenabis stated, “Previous to Sundial’s acquisition of the Senior Lender, the corporate had been in late-stage discussions with the Senior Lender referring to the extension of its obligation to repay $7 million of the principal quantity of debt on December 31, 2020. Opposite to the discussions with the Senior Lender previous to the purpose at which it was acquired by Sundial, the Senior Lender substituted the quickly to be consummated extension with a requirement that the $7 million principal compensation be made on December 31, 2020, accompanied by a forbearance settlement.” Zenabis additionally stated that the forbearance settlement required it to enter into exclusivity preparations with the Senior Lender in relation to any sale of the corporate and likewise required Zenabis to simply accept important potential monetary penalties in extra of the excellent stability of the debt owed to the Senior Lender.

On December 31, 2020, Zenabis entered right into a letter settlement to promote $7 million of dried cannabis to a different main Canadian licensed producer of cannabis and used that cash to make the $7 million mortgage fee. Zenabis stated that after making the fee it was alleged that there have been a wide range of defaults underneath the phrases of the amended and restated debenture dated June 28, 2020.

The corporate stated that not one of the alleged defaults are for failure to make funds of principal or curiosity. In Zenabis’ assertion, “The corporate believes the Senior Lender’s allegations to be spurious and with out benefit and intends to vigorously defend towards what it considers to be an ill-disguised try to bypass a good and aggressive course of to amass the corporate by improperly foreclosing the fairness of the corporate or compelling Zenabis to enter right into a transaction with Sundial.”

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Providing Particulars

The providing consists of 100,000,000 Sequence A Items, every consisting of 1 widespread share and one-half Sequence A Warrant to buy one widespread share and 33,333,334 Sequence B Items , every consisting of 1 pre-funded Sequence B Warrant (along with the Sequence A Warrants, the “Warrants”) to buy one widespread share and one-half Sequence A Warrant to buy one widespread share. Every Sequence A Unit will likely be offered at a worth of US$0.75 per Sequence A Unit and every Sequence B Unit will likely be offered at a worth of US$0.75 per Sequence B Unit, minus US$0.0001 , and the remaining train worth of every Sequence B Warrant will equal US$0.0001 per widespread share. Sundial’s gross proceeds from this providing are anticipated to be roughly US$100 million, earlier than deducting underwriting reductions and estimated providing bills. All the securities within the providing are being offered by Sundial. The Warrants will likely be exercisable instantly after issuance and have a time period of 5 years commencing on the date of issuance. The train worth of the Sequence A Warrants will likely be US$0.80 per widespread share. The providing is predicted to shut on February 2, 2021

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