iAnthus Announces Execution of Support Agreement for a Recapitalization Transaction

iAnthus Capital Holdings, Inc. (CSE: IAN) (OTCQX: ITHUF), which owns, operates, and partners with regulated cannabis operations across the United States. The company announces that it has entered into a Restructuring Support Agreement with 100% of its Secured Lenders and over 91% of the Unsecured Debentureholders (as defined below) to effect a proposed recapitalization transaction, as well as provide Interim Financing of $14 million.

The Recapitalization Transaction is expected to significantly reduce the Company’s outstanding indebtedness and annual interest costs, improve its capital structure and liquidity, and result in an enhanced financial foundation for the Company. Assuming completion of the Recapitalization Transaction, the Company’s pro forma outstanding indebtedness will be reduced from $168.7 million (excluding fees and accrued and unpaid interest thereon) as at June 30, 2020 to $101.4 million (excluding $20 million of Preferred Equity (as defined in the schedule to this news release and more fully described below)).

Pursuant to the terms of the Restructuring Support Agreement, the Recapitalization Transaction will be implemented pursuant to arrangement proceedings commenced under the British Columbia Business Corporations Act (“BCBCA”) or, only if necessary, the Companies’ Creditors Arrangement Act (“CCAA”).  The Recapitalization Transaction, if consummated, is expected to have the following key elements:

The Secured Debentures (as defined below), after the completion of the Recapitalization Transaction, will be amended to (i) reduce the principal balance from $97.5 million, plus accrued and unpaid interest and fees, to $85 million, (ii) reduce the interest rate by 5% per annum; (iii) eliminate cash pay interest; (iv) extend the original maturity date by over four years and (v) remove the conversion feature;

The $60 million principal amount of Unsecured Debentures (as defined below), plus accrued and unpaid interest and fees, will be exchanged and no longer be outstanding;

The Company will issue an aggregate of $20 million of Preferred Equity to the Secured Lenders ($5 million) and Unsecured Debentureholders ($15 million) with a maturity date of five years and no cash pay dividends (or other form of consideration on substantially similar economic terms);

The Secured Lenders, on the one hand, and the Unsecured Debentureholders, on the other hand, will each be issued an equal amount of common shares of the Company (“Common Shares”) such that each will own 48.625% of the Common Shares upon completion of the Recapitalization Transaction (50% each if completed through CCAA Proceedings (as defined below)), allocated pro rata among the holders thereof in accordance with the principal amount of the applicable debt held by each such holder prior to the closing time;

Only if the Recapitalization Transaction is consummated through the Arrangement Proceedings (as defined below), the existing holders at the time of completion (the “Existing Shareholders”) of Common Shares will retain 2.75% of the ownership of the Common Shares (the “Common Shareholder Interest”).  If the Recapitalization Transaction is completed through CCAA Proceedings, the Existing Shareholders will not receive a recovery and the Common Shareholder Interest will instead be allocated equally as among the Secured Lenders and Unsecured Debentureholders;

All existing options and warrants of the Company will be cancelled upon completion of the Recapitalization Transaction, and the Company anticipates allocating an amount of equity to be made available for management, employee, and director incentives; and

Obligations to employees, customers and suppliers will not be affected by the Recapitalization Transaction and are expected to continue to be satisfied in the ordinary course.

Subject to compliance with the Restructuring Support Agreement, the Secured Lenders and Initial Consenting Unsecured Debentureholders (as defined below) will forbear from further exercising any rights or remedies in connection with any events of default of the Company now or hereafter occurring under their respective agreements and will stop any current or pending enforcement actions respecting same.

“After an extensive review process, consultation with our financial and legal advisors and careful consideration of our available options, the Special Committee has recommended, and the Board has unanimously approved, the proposed Recapitalization Transaction,” said Robert Whelan, Chair of the Special Committee. “We believe that the Recapitalization Transaction allows iAnthus to move forward with a stronger capital structure.”

Commenting on the Recapitalization Transaction, Randy Maslow, President and Interim CEO stated, “The decline in the overall public equity cannabis markets that began in Q2 2019, coupled with the extraordinary market conditions that began in Q1 2020 due to COVID-19, have negatively impacted the financing markets and have caused significant liquidity constraints for the Company. The shared objectives of the Company and its creditors are to significantly reduce the outstanding indebtedness and annual interest costs, improve the Company’s capital structure and liquidity, and provide a stable financial foundation for the Company to capitalize on its national licensure footprint and build-out our expanding business.”