iAnthus Capital Holdings, Inc. (“iAnthus” or the “Company”) (CSE: IAN), (OTCQX: ITHUF), which owns, operates, and partners with regulated cannabis operations across the United States, announced today that the Supreme Court of British Columbia (the “Court”) has issued an interim order (the “Interim Order”) authorizing, among other things, the holding of the following meetings (the “Meetings”): (i) a meeting (the “Secured Noteholders’ Meeting”) of holders (the “Secured Noteholders”) of 13% senior secured convertible debentures (the “Secured Notes”) issued by iAnthus Capital Management, LLC (“ICM”), the Company’s wholly-owned US subsidiary; (ii) a meeting (the “Unsecured Debenture Holders’ Meeting”) of holders (the “Unsecured Debentureholders”) of 8% convertible unsecured debentures (the “Unsecured Debentures”) issued by the Company; and (iii) a meeting (the “Equityholders’ Meeting”) of holders of the Company’s common shares (the “Common Shares”), options (the “Options”) and warrants (the “Warrants”) (collectively, the “Existing Equityholders”), in each case to consider and vote upon a corporate plan of arrangement under the British Columbia Business Corporations Act (the “Plan of Arrangement”) to implement the previously announced recapitalization transaction (the “Recapitalization Transaction”).
The Recapitalization Transaction
As disclosed in the Company’s news release dated July 13, 2020 (a copy of which is available under the Company’s SEDAR profile at www.sedar.com) (the “July 13 News Release”), the Recapitalization Transaction will be implemented pursuant to the Plan of Arrangement, or, only if necessary, the Companies’ Creditors Arrangement Act (“CCAA”). If the Recapitalization Transaction is completed through the Plan of Arrangement, the existing holders of Common Shares at the time of completion (the “Existing Shareholders”) will retain approximately 2.75% of the ownership of the Common Shares (the “Common Shareholder Interest”).
If the Recapitalization Transaction does not obtain the required support from the Company’s shareholders, the Recapitalization Transaction will be implemented through proceedings under the CCAA (“CCAA Proceedings”). If implementation of the Recapitalization Transaction occurs through CCAA Proceedings, Existing Shareholders will not retain any ownership of Common Shares or receive any recovery (i.e., 0% of the ownership of the Common Shares) and the Common Shareholder Interest will instead be allocated equally as among the Secured Noteholders and the Unsecured Debentureholders.
The Meetings are scheduled to be held on September 14, 2020. The Secured Noteholders’ Meeting is scheduled to begin at 9:00 a.m. (Vancouver time), the Unsecured Debenture Holders’ Meeting is scheduled to begin at 10:00 a.m. (Vancouver time), and the Equityholders’ Meeting is scheduled to begin at 11:00 a.m. (Vancouver time).
Pursuant to the Interim Order, the record date for the Meetings is the close of business (Vancouver time) on August 6, 2020 (the “Record Date”).
The Voting Deadlines
The deadline for: (i) the Secured Noteholders, (ii) the Unsecured Debenture Holders, and (iii) the Existing Equityholders to submit their respective proxies or voting instructions in order to vote on the Plan of Arrangement is 9:00 a.m., 10:00 a.m. and 11:00 a.m., respectively (Vancouver time), on September 10, 2020. Banks, brokers or other intermediaries that hold Secured Notes, Unsecured Debentures, Common Shares, Options or Warrants on a securityholder’s behalf may have internal deadlines that require securityholders to submit their votes by an earlier date. Securityholders are encouraged to contact their intermediaries directly to confirm any such internal deadline.
Requisite Approval for the Plan of Arrangement
- The required level of approval for the Plan of Arrangement at the Secured Noteholders’ Meeting will be a majority (at least 50% + 1) in number of the Secured Noteholders voting in person or by proxy at the Secured Noteholders’ Meeting, representing not less than three-quarters (75%) in value of the Secured Notes. Each Secured Noteholder will be entitled to one vote for each US$1,000 principal amount of Secured Notes held.
- The required level of approval for the Plan of Arrangement at the Unsecured Debenture Holders’ Meeting will be a majority (at least 50% + 1) in number of the Unsecured Debenture Holders voting in person or by proxy at the Unsecured Debenture Holders’ Meeting, representing not less than three-quarters (75%) in value of the Unsecured Debentures. Each Unsecured Debenture Holder will be entitled to one vote for each US$1,000 principal amount of Unsecured Debentures held.
- The required level of approval for the Plan of Arrangement at the Equityholders’ Meeting will be: (i) a majority (at least 50% + 1) of votes cast by Existing Shareholders, excluding votes of Common Shares held or controlled by Related Shareholders (as defined below), present in person or by proxy at the Equityholders’ Meeting, voting together as a single class, on the basis of one vote for each Common Share held as of the Record Date; and (ii) a majority (at least 50% + 1) of votes cast by Existing Equityholders present in person or by proxy at the Equityholders’ Meeting, voting together as a single class, on the basis of one vote for each Common Share held or eligible to be received upon the exercise of outstanding Options or Warrants held, as applicable, as of the Record Date.
The term “Related Shareholders” means “interested parties”, “related parties” of any interested parties (unless the related party meets that description solely in its capacity as a director or senior officer of one or more persons that are neither interested parties nor issuer insiders of the Company) and “joint actors” of the foregoing (as such terms are defined in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”)). It is expected that the only Related Shareholder who holds or exercises control over Common Shares at the time of the Equityholders’ Meeting will be Gotham Green (as defined below).
Pursuant to the terms of the restructuring support agreement dated July 10, 2020 (the “Support Agreement”) among the Company, certain of the Company’s subsidiaries, the Secured Noteholders and certain holders of the Unsecured Debentures (the “Initial Consenting Unsecured Debenture Holders”), 100% of the Secured Noteholders and over 91% of the Unsecured Debentureholders have agreed to vote in favour of the Recapitalization Transaction at the Secured Noteholders’ Meeting and the Unsecured Debenture Holders’ Meeting, respectively. For additional details on the Support Agreement, see the July 13 News Release.
Attendance at the Meetings
To proactively deal with the public health impact of the novel coronavirus, also known as COVID-19, and to mitigate risks to health and safety, the Company will be holding the Meetings in a virtual-only format, which will be conducted via live audio webcast available online using the LUMI meeting platform. During the live audio webcasts, Secured Noteholders, Unsecured Debenture Holders and Equityholders will be able to hear the Secured Noteholders’ Meeting, the Unsecured Debenture Holders’ Meeting and the Equityholders’ Meeting respectively, and such securityholders and duly appointed and registered proxyholders will be able to submit questions and vote when their applicable Meeting is being held. The management information circular of the Company in respect of the Meetings (the “Circular”) provides important and detailed instructions about how to participate at the Meetings.
The Circular contains information regarding procedures for voting on the Plan of Arrangement, as well as other background and material information regarding the Recapitalization Transaction. The Company expects the mailing of the Circular to begin on or about August 17, 2020. The Circular and the forms of proxies will also be available as follows:
- on iAnthus’ website at www.ianthus.com;
- under iAnthus’ SEDAR profile at www.sedar.com;
- through Laurel Hill Advisory Group by calling toll free at 1-877-452-7184 or 1-416-304-0211 or by email at firstname.lastname@example.org.
Securityholders’ Questions or Voting Assistance
iAnthus’ securityholders who have questions or need assistance with voting their respective Secured Notes, Unsecured Debentures, Shares, Options and/or Warrants can also contact the iAnthus’ Proxy Solicitation Agent, Laurel Hill Advisory Group.
Laurel Hill Advisory Group
North American Toll Free: 1-877-452-7184
Calls Outside North America: 1-416-304-0211
The Company and ICM entered into an arrangement agreement dated August 6, 2020 (the “Arrangement Agreement”) which governs the terms and conditions of the Plan of Arrangement. Details of the Arrangement Agreement and the Plan of Arrangement are included in the schedule to this news release which is qualified in its entirety with reference to the full text of the Arrangement Agreement and the Plan of Arrangement attached thereto, a copy of each of which will be filed under the Company’s SEDAR profile at www.sedar.com.
Court Approval and Implementation
If the Plan of Arrangement is approved by the requisite majorities at the Meetings, the Company and ICM will attend a hearing before the Court currently scheduled for September 25, 2020, or such other date as may be set by the Court to seek final Court approval for the Plan of Arrangement (the “Final Order”).
Certain of the transactions contemplated by the Recapitalization Transaction may trigger a review and approval requirement by state-level regulators in certain U.S. states with jurisdiction over the licensed cannabis operations of entities owned in whole or in part or controlled directly or indirectly by iAnthus, including potentially: Arizona, Colorado, Florida, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, New York and Vermont. Where required, iAnthus intends to promptly commence the review and approval process and to expedite the process to the greatest extent possible.
As previously disclosed in the July 13 News Release, certain of the Secured Lenders (as defined below) (being funds affiliated with Gotham Green Partners, LLC (collectively “Gotham Green”)) are “related parties” as such term is defined in MI 61-101. Accordingly, the Recapitalization Transaction is a “related party transaction” as defined in MI 61-101 since certain of the Secured Noteholders and the Interim Lenders (as defined below) (together, the “Secured Lenders”) are each a “related party” (as defined in MI 61-101) of the Company. The Company will rely on the exemption from the formal valuation requirement at section 5.5(b) of MI 61-101 (Issuer Not Listed on Specified Markets) in respect of the Recapitalization Transaction. As a result of the Company holding the Equityholders’ Meeting, the exemption from minority approval requirement at Section 5.7(e) of MI 61-101 (Financial Hardship) in respect of the Recapitalization Transaction may not be available and accordingly, the Company is not relying on an exemption for minority approval.
iAnthus owns and operates licensed cannabis cultivation, processing and dispensary facilities throughout the United States, providing investors diversified exposure to the U.S. regulated cannabis industry. Founded by entrepreneurs with decades of experience in operations, investment banking, corporate finance, law and healthcare services, iAnthus provides a unique combination of capital and hands-on operating and management expertise. iAnthus currently has a presence in 11 states and operates 36 dispensaries (AZ-4, MA-1, MD-3, FL-16, NY-3, CO-1, VT-1 and NM-7 where iAnthus has minority ownership). For more information, visit www.iAnthus.com.