Tilray has finally agreed on Thursday to purchase about $211 million of HEXO’s debt, which allows the pharmaceutical company to select a considerable equity stake in its troubled adversary.
With this new agreement, HEXO will enjoy more advantageous debt repayment conditions, which could save them from years of a financial crisis.
The US-listed stock prices for HEXO were 17% higher before trading started.
Chair of HEXO’s board, Mark Attanasio, said, “HEXO has endured a crippling overhang for the past twelve months, due to punitive redemptions and discounted dilutive financings, and we needed to solve this issue in order to make positive progress.”
HEXO disclosed the previous year of issues with its senior secured convertible notes released on May 27 and added it might not have sufficient money coming in to sustain paying off the debt.
The latest agreement offers Tilray at least C$20 million in interest payments, attaching around four additional cents per share to future earnings and C$50 million of cost savings, to be distributed equally with HEXO within two years of the execution of the deal.
The notes, which Tilray will buy from the latest creditor HT Investments MA LLC, would be revised to authorize Tilray to execute conversion rights for C$0.90 per HEXO share and procure a considerable equity ownership position in HEXO in the future.
HEXO said last month that it would restructure its board, immediately in effect as a move under an agreement with activist stockholder Adam Arviv and his fund Kaos Capital for issues over the company’s falling share price.