AYR Wellness Inc. (CSE: AYR.A, OTCQX: AYRWF) (“AYR” or the “Company”), a leading vertically integrated U.S. multi-state cannabis operator, today announced that it has reached an agreement with Elk Spring Partners, LLC (together with the other selling securityholders under the MIPA (as defined below), the “NJ Counterparties”) to amend the earn-out payment terms under the membership interest purchase agreement (the “MIPA”) dated as of March 26, 2021, as amended, relating to the Company’s acquisition of New Jersey-based GSD NJ, LLC (“GSD”).
The earn-out formula and payment terms under the MIPA were amended as follows:
- The first US$10 million portion of the earn-out will continue to be payable in cash, which payment is expected to be made to the NJ Counterparties by May 19, 2023.
- The next US$14 million portion of the earn-out, which was to be satisfied by issuing 12.5% promissory notes due September 2024 with interest and principal payments, will instead be satisfied by issuing 13.5% promissory notes due December 2026 with monthly interest-only payments until May 2024 (with 1% monthly amortization thereafter). The promissory notes are expected to be issued by May 19, 2023. This amendment results in a meaningful extension of the maturity date and delays repayment of principal, thereby preserving cash on the balance sheet; and
- The remaining portion of the earn-out, which up to a potential maximum amount of US$72.75 million based on sales of GSD, was to be satisfied by issuing subordinate voting shares (“SVS”) based on a 15% discount to the then market price of the SVS, will instead be satisfied by (i) issuing an aggregate of 3,797,468 SVS or shares of CSAC Acquisition NJ Corp. that are exchangeable for SVS at any time or from time to time at the discretion of the holder, at a price equal to US$0.79 per SVS by May 19, 2023; and (ii) a cash payment to the NJ Counterparties of approximately US$10.2 million to be made at a future time based on circumstances related to negotiations with other debtholders. This amendment results in a substantial reduction of dilution to the Company’s shareholders.
In addition, the Company announced today that it has reached an agreement with Green Partners Investor LLC and the other selling securityholders (together, the “Sira Counterparties”) to amend the payment terms under the equity exchange agreement dated as of May 24, 2019, as amended, relating to the Company’s Massachusetts-based acquisition of Sira Naturals Inc. (the “EEA”).
The payment terms under the EEA, which were expected to result in a cash payment of US$27.5 million on or before May 1, 2024, has been amended to be paid on the later of (i) the date that is ten calendar days following the maturity date of AYR’s 12.5% senior notes due December 10, 2024 (as may be amended or extended); or (ii) May 1, 2026, but in no event later than December 10, 2026.The unpaid portions of the EEA earn-outs will bear interest at a rate of 6% per annum with 10% annual amortization. The amendment of the EEA earn-out terms results in a material portion of the earn-out payment being deferred until at least May of 2026, thereby preserving cash on the balance sheet.
The Company also announced today that it has engaged Moelis & Company LLC as its financial advisor to help the Company explore capital structure alternatives to extend upcoming debt maturities.
The Company also announced today that it is in discussions with holders of vendor-take-back and other promissory notes regarding amendments to the terms (including maturities) of such notes. The Company has executed amendments to promissory notes issued to the NJ Seller Representative and certain of its affiliates to extend the maturity dates of notes with outstanding principal amount of US$27.65 million in the aggregate for two (2) years, conditioned upon, among other things, holders of at least 75% of the Company’s 12.5% senior notes due 2024 (“Senior Notes”) agreeing to extend the maturity date of such Senior Notes by at least two (2) years.
