High Tide, a retail-focused cannabis company with bricks-and-mortar as well as global e-commerce assets, entered into a binding commitment letter with connectFirst Credit Union for a $19 million credit facility with an initial five-year term , at connectFirst’s floor interest rate. The terms of the Credit Facility were renegotiated with connectFirst to provide a larger immediately-accessible facility for High Tide, with a smaller total commitment from connectFirst initially, which High Tide expects will grow over time. Upon closing the credit facility with connectFirst, the company expects to use the proceeds to fund continued organic growth, general working capital requirements and potential future M&A activities.
“I am very happy to provide this positive update today. Our business remains on a strong footing and we continue to gain traction as the leader in the Canadian cannabis retail market. Once in place, this facility will help us continue to propel our growth in an increasingly non-dilutive fashion. Through our conversations with connectFirst, we expect that this line will expand in tandem with our business growth, as we continue to execute on our conveyed business plan. This will enable us to capitalize on attractive M&A and organic opportunities in North America and Europe,” Raj Grover, president and CEO of High Tide, said. “I look forward to sharing our results and progress for our fiscal third quarter in mid-September, and we anticipate the closing of this facility around the same time. I remain as confident as ever in High Tide’s growth trajectory in Canada, the United States, and newly-emerging international markets.”
“We have watched locally based High Tide execute over the last several years. Accordingly, we are very excited about this new partnership between High Tide and connectFirst helping to create a more prosperous Alberta – and beyond. Our senior debt offering will provide High Tide the capital to continue to execute their impressive growth trajectory,” Sourav Neogi, relationship manager, corporate and commercial banking at connectFirst Credit Union, said.
Commitment Letter Terms:
- CAD$19 million ($14.6 million) term debt: Accessible on request by High Tide, blended principal and interest payments.
- Low interest rate: High Tide continues to receive industry leading interest rates that reflect the strength of its business.
- Financial covenants: the credit facility will have a quarterly tested financial covenant of debt service coverage ratio of not less than 1.40:1, a monthly current ratio covenant of not less than 1.25:1 and a quarterly tested covenant of funded debt to EBITDA ratio of not more than 3:1 beginning with the quarter ending January 31, 2023. High Tide’s 12-month forecast projects it to be comfortably in compliance with all financial covenants.
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The company expects to close on the credit facility during the first half of September 2022, subject to certain pre-disbursement conditions and satisfaction of other customary conditions precedent.
