Canopy Growth Corp. (TSX: WEED and NYSE: CGC) announced Wednesday it loaned TerrAscend Corp. (CSE: TER and OTCQX: TRSSF) $80.5 million to help the company fund its Canadian operations.
In return, TerrAscend issued 17.8 million common share purchase warrants over two separate tranches to Canopy, according to a company statement.
The debenture will grow with a 6.1 per cent interest rate and the first tranche can be exercised as early March 10, 2030, or if TerrAscend pays the full loan plus interest to Canopy in cash before then. The warrants could also be exercised by Canopy if the U.S. legalizes cannabis on a federal level.
The loan is secured by TerrAscend Canada and is not convertible to, or guaranteed, by its parent company TerrAscend.
“This financing allows us to continue to fund and execute on our Canadian, U.S. hemp and international businesses while remaining focused on operations with high barriers to entry,” TerrAscend’s interim CEO Jason Ackerman said in a statement.
The $80.5 million will be used to fund TerrAscend Canada’s operations, its Arise Bioscience U.S. hemp division, international expansion and the company’s debts.
This isn’t the first time the companies have done business.
When TerrAscend expanded into American markets in November 2018, Canopy Growth and its venture capital arm, Canopy Rivers Inc. (TSXV: RIV), agreed to exchange their common shares for exchangeable shares that the companies could cash in on if America ever legalizes weed. At that time, Canopy owned a combined $133 million worth of common shares in the company.
This allowed TerrAscend to expand while still following the rules of each securities it listed on.
Canopy and Canopy Rivers each received around 19.5 million exchangeable shares each, which meant they each owned 5o per cent of the issued and outstanding exchangeable shares.
As exchangeable shares are not listed on stock exchanges these exchangeable shares do not entitle either company to voting rights, dividends or other rights, until converted to common shares.
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