ShinyBud Amends Debt Structure for Improved Flexibility and Lower Ongoing Debt Carrying Cost

Published: May 6, 2022

ShinyBud Amends Debt Structure for Improved Flexibility and Lower Ongoing Debt Carrying Cost

ShinyBud Corp. announced entry into two agreements that change its component debt structure to provide greater strategic and operational flexibility and a lower total ongoing debt carrying cost. The Company has entered into an agreement for a new credit facility for an unsecured loan of up to $1,000,000 (the “New Facility”) with one of its founding shareholders. In addition, its wholly-owned subsidiary Shiny Bud Inc. (the “Borrower”) has executed an amendment to its existing secured debt with FirePower Capital(1) (the “Amendment”) involving a $1,000,000 prepayment of the $3,000,000 principal (the “Term Loan”) and lifted covenants and security to better accommodate the next stage of business growth.

“The FirePower Capital Term Loan Amendment and New Facility lowers our ongoing debt carrying cost while providing greater operational and strategic flexibility as we plan to execute on our growth strategy,” said Kevin Reed, Chairman and Chief Executive Officer. “We thank FirePower and our shareholders for their accommodating support as superior debt partners and their ongoing commitment to help build our business.”

New Credit Facility
The New Facility contemplates an unsecured loan from one of the Company’s founding shareholders of up to $1,000,000, of which an initial advance of up to $500,000 is to be made by September 30, 2022. This unsecured borrowing bears interest at a rate of 10% per annum. Further advances under the New Facility are subject to pre-approval and mutual agreement of ShinyBud and the shareholder and therefore not assured.

The Company has issued a promissory note in respect of the New Facility which matures on December 15, 2023, at which time the outstanding principal and all accrued interest thereon will be due and payable.  Interest under the New Facility will be determined daily and compounded monthly.

The Company has no material covenants under the New Facility beyond the requirement to repay principal and accrued interest on maturity, and is permitted to prepay, fully or in part from time to time, the outstanding principal and accrued interest prior to maturity.

Term Loan Repayment
On June 17, 2021, the Borrower entered into a loan agreement with FirePower Capital for a $3,000,000 loan at 13.75% interest, with related issued warrants and certain restrictive covenants.  Through this Amendment, the Term Loan will be paid down by $1,000,000 and a bonus in the amount of $400,000 will be paid to FirePower Capital.

The financial covenants under the Term Loan, requiring that the Borrower maintain a total debt to trailing 6-month annualized EBITDA(2) ratio of not more than 2:1 and a minimum debt service coverage ratio of at least 1.4 (in each case as calculated in accordance with the loan agreement on the last day of each month) will come into effect on October 31, 2022. All operating and other covenants under the Term Loan will remain in effect for so long as the loan agreement is in force.

The $1,000,000 principal repayment under the Term Loan is to be made in five equal monthly installments of $200,000, beginning in May 2022 with the remaining installments due on the first day of June, July, August and September, respectively(3).

In connection with the Amendment, the Borrower has agreed to pay a bonus payment in the aggregate amount of $400,000, payable in two equal instalments of $200,000 due October 1, 2022 and November 1, 2022, reducing total debt exposure within the Borrower and whereupon no further fee will be payable in respect of any voluntary or mandatory prepayment of the Term Loan(4).

Endnotes

(1)

Secured debt of $3,000,000 due June 17, 2024 with Evergreen Gap Debt GP Inc. (“FirePower Capital”).

(2)

EBITDA refers to earnings before interest, taxes, depreciation, and amortization. This is a non-IFRS financial measure, does not have a standard meaning under IFRS, and is therefore unlikely to be comparable to similar measures presented by other issuers. Non-IFRS measures provide investors with a supplemental measure of the Company’s operating performance and therefore, highlight trends in Company’s core business that may not otherwise be apparent when relying solely on IFRS measures. Management uses non-IFRS measures in measuring the financial performance of the Company.

(3)

Subject to the Borrower’s right, on 30 days’ prior written notice, to make larger instalments or a single payment (provided that the full $1,000,000 sum is paid by September 1, 2022).  

(4)

Prior to this Amendment, the Term Loan agreement otherwise requires that, in connection with any voluntary or mandatory prepayment, the Borrower pay a fee equal to (i) 6 months’ interest, if the prepayment is made before June 17, 2022, being the first anniversary date of the Term Loan, (ii) 4 months’ interest, if the prepayment is made after June 17, 2022 but before June 17, 2023, during the second year of the Term Loan, or (iii) 3 months’ interest, if the prepayment is made after June 17, 2023, during the third year of the Term Loan (calculated in each case based on the scheduled interest payments that would have been made for the applicable number of months immediately following the date of prepayment, being approximately $1,130 per day at the original $3,000,000 loan amount and which will be reduced to approximately $753 per day following completion of the $1,000,000 repayment described above).

About ShinyBud
ShinyBud Corp. is a multi-banner cannabis retailer with 41 corporate and licensed stores across Ontario – Canada’s largest cannabis market. The Company is on a mission to help people never settle, live fully by offering a wide range of carefully curated cannabis products and by creating a more diverse and accessible cannabis experience for adult consumers. ShinyBud’s board and management team has extensive retail operating experience, a key competitive differentiator in leading its growth strategy and franchising program. ShinyBud trades on the TSX Venture Exchange (TSXV) under the ticker symbol SNYB. For more information, please visit investors.shinybud.com.

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