Delta 9 Announces Commitment Letter for $32 Million Non-Dilutive Credit Facility

WINNIPEG, Manitoba- DELTA 9 CANNABIS INC. (TSX: DN) (OTCQX: DLTNF) announced that it has entered into a binding commitment letter  with connectFirst Credit Union Ltd. for $32 million in credit facilities. The Proposed Credit Facilities would be offered to the Company through First Calgary Financial, a division of connectFirst.

“With this debt financing, Delta 9 has added financial flexibility to optimize its capital structure and is well positioned to continue to execute its growth strategy,” said John Arbuthnot, CEO of Delta 9. “This transaction reflects the strong financial and operating results, which Delta 9 and its team have been able to produce in the wake of cannabis legalization in Canada, and confidence from our new senior lender, connectFirst. To our knowledge, this interest rate is among the most competitive rates established by any public cannabis company to date.”

Financing Highlights:

Total Capital and Extended Maturity: The Proposed Credit Facilities include a $23 million commercial mortgage facility, a $5 million acquisition facility, and a $4 million authorized overdraft. Facility 1 matures after 5 years and amortizes over a 12-year term. Facility 1 is anticipated to be established in multiple tranches advancing at various times for purposes including:

• $11.2 million for the repayment of existing long-term debt.
• $11.8 million for the repayment of the Company’s 8.5% unsecured convertible debentures due July 17, 2022.

Lower Interest Rate: The interest rate under the Proposed Credit Facilities is a 5-year fixed rate of 4.55% per annum for Facility 1 and connectFirst prime + 1.50% per annum for the authorized overdraft. This reflects a blended interest rate reduction of approximately 1.37% versus the Company’s current long term credit facilities and an interest rate reduction of approximately 3.95% versus the Convertible Debentures. The combined interest rate reductions under Facility 1 represent approximately $550,000 in annualized interest savings for the Company.

Improved Liquidity and Cash Flows: The Proposed Credit Facilities would result in approximately $1.2 million in additional operating capital on closing and an additional $470,000 in annualized principal repayment reductions. The proceeds would be used for continued growth and general working capital requirements.

Dedicated Acquisition Capital: The Proposed Credit Facilities would also provide access to up to $5 million in capital to fund a potential future accretive acquisition. The Company plans to accelerate its growth plans through acquisitions of EBITDA positive cannabis businesses in Canada.

Debt Financing and Repayment of CWB and Convertible Debenture:

The Company expects to repay its credit facilities with its current bank lender as a part of its closing with connectFirst. The Company expects to repay its $11.8 million of Convertible Debentures on or before the maturity date of July 17, 2022.

“We’re very excited about the new partnership between Delta 9 and connectFirst. Delta 9 is one of Canada’s most established and recognizable cannabis brands and our senior debt offering will provide capital to continue their growth trajectory,” says Craig Zaychkowsky, Assistant Vice President, Corporate and Commercial Banking, connectFirst. “This debt offering allows connectFirst to continue to prove that we have our members’ backs as we offer the financial tools, passion and expertise for a brighter future.”

The Proposed Credit Facilities remain subject to certain pre-disbursement conditions and satisfaction of other customary conditions precedent.

Disclaimer for Forward-Looking Information

Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the Company’s future business plans and other matters. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Forward looking statements in this news release include (i) statements relating to the completion of the Proposed Credit Facilities, (ii) statements relating to potential future acquisitions. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements, including failure by the Company to satisfy the conditions required to obtain the Proposed Credit Facilities, approval of the Proposed Credit Facilities by connectFirst and all risk factors set forth in the annual information form of Delta 9 dated March 31, 2021 which has been filed on SEDAR. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Readers are urged to consider these factors carefully in evaluating the forward-looking statements contained in this news release and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. These forward-looking statements are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws.

(This information is primarily sourced from Delta 9.  Highly Capitalized has neither approved nor disapproved the contents of this news release. Read our Disclaimer here).