| Item 1.01 | Entry into a Material Definitive Agreement. |
Redemption Agreements
On July 13, 2023, Canopy Growth Corporation (the “Company”) entered into privately negotiated redemption agreements (collectively, the “Redemption Agreements”) with certain holders (the “Holders”) of its 4.25% Convertible Senior Notes due on July 15, 2023 (the “Notes”). Pursuant to the Redemption Agreements, the Company redeemed approximately C$193 million of the aggregate principal amount of the Notes held by the Holders for consideration in the aggregate amount of C$193 million for (i) an aggregate cash payment in the amount of approximately $101 million in cash, (ii) the issuance of 90,430,920 newly issued common shares of the Company (the “common shares”) and (iii) the issuance of approximately C$40.4 million aggregate principal amount of newly issued non-interest bearing unsecured convertible debentures (the “Debentures”).
Indenture and Debentures
The Debentures were created and are governed pursuant to the terms of a debenture indenture (the “Indenture”), dated as of July 14, 2023 (the “Indenture”), between the Company and Odyssey Trust Company, as trustee (the “Trustee). The Debentures shall mature on January 15, 2024, unless earlier converted in accordance with the terms of the Indenture. The Debentures are convertible into common shares (the “Debenture Shares”) at a conversion price equal to $0.55, subject to adjustment in certain events (the “Conversion Price”), at the option of the Holder at any time or times following the approval by the Company’s shareholders for issuance of all of the Debenture Shares in excess of 19.99% and 25%, as applicable, of the issued and outstanding common shares in accordance with the applicable rules and regulations of the Nasdaq Stock Market and the Toronto Stock Exchange (the “Shareholder Approval”).
The Indenture governing the Debentures contains customary and other events of default including, among other things, the occurrence of a default or event of default (after the giving of all applicable notices or the expiry of all applicable grace or cure periods) with respect to any mortgage, agreement or other instrument of the Company under which there may be outstanding any indebtedness for money borrowed in excess of $10 million, a judgment for the payment of $10 million or more in the aggregate rendered against the Company, a decree or court order adjudging the Company as bankrupt or insolvent or if the Company institutes bankruptcy or insolvency proceedings, or if a resolution is passed for the winding-up or liquidation of the Company. If an event of default occurs and is continuing, the Trustee may, in its discretion, and shall, upon receipt of a request in writing signed by the Holders of not less than 25% in principal amount of the Debentures then outstanding, declare due and payable the principal of all Debentures then outstanding and the Company will be required to deliver to the Trustee for the benefit of the Holders (i) in the event that Shareholder Approval has not been obtained, cash equal to the sum of the aggregate principal amount of the Debentures then outstanding or (ii) in the event that Shareholder Approval has been obtained, pursuant to the Indenture, the Company will, at its sole option, have the right to elect to settle the Debentures in (x) cash equal to the sum of the aggregate principal amount of the Debentures then outstanding or (y) such number of common shares as is equal to the sum of the aggregate principal amount of the Debentures then outstanding divided by the Conversion Price; provided, however, that the Company has agreed with its lenders that it will settle the Debentures in common shares on the maturity date if the Shareholder Approval has been obtained.
Pursuant to the terms of the Indenture, the Company is not permitted to declare or pay any dividend to the holders of its issued and outstanding common shares after the occurrence and continuance of an event of default unless and until such event of default has been cured or waived or has ceased to exist.
Amended Credit Agreement
On July 14, 2023, the Company entered into agreements with certain of its lenders under its term loan credit agreement, dated March 18, 2021, as amended on October 24, 2022 (the “Original Credit Agreement”), pursuant to which the Company and certain of its lenders agreed to amend certain terms of the Original Credit Agreement (collectively, the “Amended Credit Agreement”). The Amended Credit Agreement reduces the principal indebtedness under the credit facility (the “Credit Facility”) in the amount of $100 million of for a cash payment of $93 million (the “Paydown”) and includes an agreement from the Company to direct certain proceeds from completed and contemplated asset sales to reduce indebtedness under the Credit Facility and receive principal reductions at, in certain circumstances, $0.95 on the dollar toward such repayments. In addition, the Amended Credit Agreement, among other things, removes (i) the US$100,000,000 minimum liquidity covenant concurrently with completion of the Paydown; and (ii) the prepayment premium.
