Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) (“Canopy Growth” or the “Company”) announced today that it has priced its previously announced offering of convertible senior notes due 2023 (the “notes”). The Company will issue C$500 million aggregate principal amount of the notes. Canopy Growth has granted the initial purchasers of the notes an option to purchase up to an additional C$100 million aggregate principal amount of notes. The offering was upsized from the previously announced C$400 million aggregate principal amount.
Cowen and Company, LLC and BMO Nesbitt Burns Inc. are acting as joint book-running managers and Eight Capital and Bryan, Garnier & Co. are acting as co-managers for this offering. Canopy Growth has been advised by Greenstar Canada Investment Limited Partnership, an affiliate of Constellation Brands, Inc., that it intends to participate in the offering. The remainder of the offering will be widely allocated to institutions, primarily in the United States, Europe, as well as Canada.
The notes will be offered and sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Act”), and outside the United States to non-U.S. persons in compliance with Regulation S under the Act. The notes will be sold to accredited investors in Canada pursuant to an exemption from the prospectus requirements of Canadian securities laws.
Canopy Growth expects to use the net proceeds from the offering of the notes for supporting expansion initiatives and general corporate purposes, including working capital requirements.
The notes will be general unsecured, senior obligations of Canopy Growth and interest will be payable semi-annually in arrears at a rate of 4.25% annually. The initial conversion rate for the notes will be 20.7577 common shares of the Company per C$1,000 principal amount of notes, subject to potential adjustments. The initial conversion rate is equivalent to an initial conversion price of approximately C$48.18 per Company common share. The initial conversion price represents a premium of approximately 25% relative to the last reported closing sale price of the Company common shares on the TSX on June 14, 2018.
The notes will mature on July 15, 2023, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. Prior to January 15, 2023, the notes will be convertible at the option of holders only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the business day immediately preceding the maturity date. Upon conversion, the notes may be settled in cash, common shares of Canopy Growth or a combination of cash and common shares of Canopy Growth, at the election of Canopy Growth.
Canopy Growth may not redeem the notes prior to July 20, 2021, except in the event of certain changes in Canadian tax law. Canopy Growth may redeem for cash all or any portion of the notes, at its option, on or after July 20, 2021 if the last reported sale price of Canopy Growth’s common shares for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on the trading day immediately preceding the date on which Canopy Growth provides notice of redemption has been at least 130% of the conversion price then in effect on each such trading day. Redemptions of notes in either case shall be at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
If Canopy Growth undergoes a fundamental change, holders of the notes will have the right to require Canopy Growth to repurchase for cash all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Canopy Growth will also be required, in certain circumstances, to increase the conversion rate for a holder who elects to convert its notes in connection with certain corporate events or during the related redemption period.
The offering of the notes is expected to close on or about June 20, 2018.
This news release is neither an offer to sell nor a solicitation of an offer to buy any of these securities (including any common shares of Canopy Growth into which the notes are convertible) and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful. Any offers of the notes will be made only by means of a private offering memorandum.
The notes and any common shares of Canopy Growth issuable upon conversion of the notes have not been registered under the Act or any state securities laws, or qualified for distribution by prospectus in Canada, and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements, or sold in Canada absent an exemption from the prospectus requirements of Canadian securities laws.
Here’s to Future Growth.