Sugarbud Announces Non-Dilutive Secured $5.0 Million Credit Facility with Connect First Credit Union Ltd.
CALGARY, May 22, 2020 /CNW/ - Sugarbud Craft Growers Corp. (TSXV: SUGR, SUGR.WT) ("Sugarbud" or the "Company") is pleased to announce that it has entered into a commitment letter with Connect First Credit Union Ltd. ("First Calgary") in respect of a $5.0 million senior secured credit facility (the "Credit Facility").
The committed interest rate under the Credit Facility is the Canada Bond rate for five years + 3.55% with a minimum floor rate of 4.25% and matures five years following closing. The Credit Facility replaces the Company's existing debt facility with Pillar Capital Corp. The proceeds from the Credit Facility will be used to repay the $2.04 million outstanding under the existing debt facility and for ongoing working capital purposes. The Company has the right to repay amounts outstanding under the Credit Facility prior to the maturity date without penalty. The Credit Facility is subject to continued compliance with customary financial covenants. Subject to the satisfaction of certain customary conditions, including the finalization of security documentation, the full amount of the Credit Facility will be available at closing; which the Company expects to occur on or about June 1st, 2020.
Upon the anticipated closing of the Credit Facility and the previously announced marketed public offering (the "Offering") of secured convertible debenture units (the "Debenture Units") of up to $4.0 million, subordinating in priority and ranking to the Credit Facility, the Company will be strategically positioned to have adequate funding for the completion of Phase 1a and to also begin the build-out for Phase 1b at the Company's purpose built 29,800 sq. ft. facility in Stavely, Alberta for the cultivation and production of high quality, ultra-premium craft cannabis products. Sugarbud expects to complete the construction and build-out of Phase 1a in 2020 for an approximate maximum annual production design capacity of between 3,308 and 3,891 kilograms. Phase 1b will expand the production capacity by approximately an additional 3,308 and 3,891 kilograms, and together with Phase 1a for an aggregate funded, annual production design capacity of 6,616 and 7,782 kilograms. Sugarbud is positioned to unlock significant shareholder value with its anticipated increase in production capacity upon the completion of Phase 1, inclusive of Phase 1b and 1c.
"We are pleased to be working with Sugarbud and are excited to support them and the community of Stavely as they continue their quest in this dynamic new industry. Our approach at First Calgary is to work with business teams who have a great vision with a solid business plan. We are proud to welcome Sugarbud as new members of our Credit Union," stated Ryan Andries, Vice President – Commercial Banking at First Calgary.
"We view this new credit facility with First Calgary as a strong vote of confidence in our management team, our business model and most importantly our ability to deliver strong operational and financial results," stated Sugarbud's Chief Executive Officer, John Kondrosky.
"As a Company, we are always looking for ways to balance our overall cost of capital and optimize our capital structure," continued Mr. Kondrosky. "We believe that this new credit facility with First Calgary more than meets these criteria, further strengthens our balance sheet and provides the Company with the additional working capital necessary to continue to successfully execute against our primary growth objectives and priorities," concluded Mr. Kondrosky.
Sugarbud also announces the filing of its year ended December 31, 2019 audited consolidated annual financial statement ("Financial Statements"), related management's discussion and analysis ("MD&A") and annual information form ("AIF"), which are available on SEDAR at www.sedar.com and on Sugarbud's website at www.sugarbud.ca.
The Offering of Debenture Units at a price of $1,000 per Debenture Unit will consist of: (i) one 12.0% secured convertible debenture; and (ii) 20,000 common share purchase warrants of the Company (the "Warrants"). Each Warrant will entitle the holder to purchase one common share in the capital of the Company at an exercise price of $0.05, at any time up to 36 months following the date of issuance. Further details on the terms of the Offering may be obtained from the preliminary short form prospectus and term sheet on www.sedar.com. Mackie Research Capital Corporation is acting as sole book-runner and agent in respect of the Offering.
About Sugarbud
Sugarbud is a federally licensed, Alberta-based craft cannabis company; focused on the cultivation and production of superior, select-batch, craft cannabis products. Our vision and mission is to become a trusted and well-respected brand - renowned for providing exceptional high-quality craft cannabis products to legal markets by delighting the most discerning of cannabis consumers.
Forward Looking and Cautionary Statements
This news release contains forward-looking statements. More particularly, and without limitation, this news release contains statements concerning: Sugarbud's assessment of future plans, operations and cannabis cultivation; and the closing of the Credit Facility and the use of the proceeds thereof. When used in this document, the words "will," "anticipate," "believe," "estimate," "expect," "intent," "may," "project," "should," and similar expressions are intended to be among the statements that identify forward-looking statements.
The forward-looking statements are founded on the basis of expectations and assumptions made by Sugarbud. Forward-looking statements are subject to a wide range of risks and uncertainties, and although Sugarbud believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will be realized. Any number of important factors could cause actual results to differ materially from those in the forward-looking statements including, but not limited to: the terms and conditions of the Credit Facility; currently contemplated expansion and development plans may cease or otherwise change; production of cannabis may be lower than expected, Sugarbud may not obtain the required approvals from Health Canada, the size of the medical marijuana market and the recreational marijuana market; government regulations, including future legislative and regulatory developments involving medical and recreational marijuana; construction delays; risks inherent in the agricultural business, such as insects, plant diseases and similar agricultural risks which can have a significant impact on the size and quality of the harvest of cannabis crops; competition from other industry participants; and other factors more fully described from time to time in the reports and filings made by Sugarbud with securities regulatory authorities. In addition, the Company cautions that current global uncertainty with respect to the spread of the COVID-19 virus and its effect on the broader global economy may have a significant negative effect on the Company. While the precise impact of the COVID-19 virus on the Company remain unknown, rapid spread of the COVID-19 virus may have a material adverse effect on global economic activity, and can result in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to the Company. Please refer to the AIF and MD&A for additional risk factors relating to Sugarbud, which can be accessed under Sugarbud's profile on www.sedar.com.
Except as required by applicable laws, Sugarbud does not undertake any obligation to publicly update or revise any forward-looking statements.
Neither the TSXV nor its regulation services provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.
SOURCE SugarBud Craft Growers Corp.
John Kondrosky, Chief Executive Officer, Sugarbud Craft Growers Corp., Phone: (604) 499-7847, E-mail: [email protected]; Investor Relations Contact, Gary Perkins, President, Tekkfund Capital Corp., Tel: (416) 882-0020, E-mail: [email protected], Website: http://www.sugarbud.ca/, Address: Suite 620, 634 - 6th Avenue S.W., Calgary, Alberta T2P 0S4
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