VANCOUVER, Columbia – Swiss Water Decaffeinated Coffee Inc. (TSX – SWP) (“Swiss Water” or “the Company”) is pleased to announce an amendment to the existing senior debt facility with the Company’s senior lender, Business Development Bank of Canada, with participation by a new lender, Farm Credit Canada, which would provide the Company with up to an additional $25 million of senior debt financing at an interest rate of approximately four percent per annum and a favourable payment and amortization schedule by increasing the senior debt facility to $45 million from the current $20 million (the “Amended Senior Facility”).
The incremental funds available under the Amended Senior Facility, together with the Company’s existing available credit and projected internally generated cash flow, are anticipated to be sufficient to fund the completion of the Company’s Titan 2 production facility.
In order to obtain the new financing, the Company requires an amendment to an existing, outstanding convertible debenture (the “Mill Road Debenture”) of the Company issued to Mill Road Capital II, L.P. (“Mill Road”). The terms of the Mill Road Debenture include a restrictive covenant that limits the dollar amount of indebtedness ranking senior to the indebtedness thereunder to a maximum of $45 million.
The Company and Mill Road agreed on terms and executed a term sheet on May 20, 2021 (the “Term Sheet”) under which Mill Road would amend the restrictive covenant to increase the restriction on senior indebtedness to a maximum of $60 million, and would extend the maturity date of the Mill Road Debenture by one year, to October 31, 2024.
In return, the terms of the Mill Road Debenture would be amended to (i) increase the maximum current interest rate from 7.85% to 9%, (ii) provide an additional 1.5% “payment in kind” interest, (iii) amend the conversion feature by (A) cancelling the existing conversion feature and (B) replacing the existing conversion feature with warrants to allow Mill Road to purchase up to 2.25 million common shares at a price of $3.33 per share (representing a premium of 10% over the closing price on the date of execution of the Term Sheet); (iv) provide for a $100,000 amendment fee payable to Mill Road, (v) remove a restriction limiting Mill Road’s holdings, following conversion, to a maximum of 19.99% of the issued and outstanding shares of the Company; and (vi) reimburse Mill Road for its associated legal expenses (the “Mill Road Amendment”).
The Mill Road Amendment is considered to be a related party transaction under the provisions of Multilateral Instrument 61-101 Protection of Minority Securityholders in Special Transactions and is subject to the approval of the Company’s Shareholders, other than Mill Road.
The Company will seek shareholder approval of the Mill Road Amendment at the Company’s upcoming Annual General and Special Meeting of Shareholders, to be held on June 25, 2021. The Mill Road Amendment is also subject to the approval of the Toronto Stock Exchange.
Iain Carswell, Swiss Water’s CFO commented “We are pleased to have secured the necessary financing to not only maintain our existing business, but materially increase our capacity to meet the growing demand for our Swiss Water chemical-free decaffeinated coffee.” Don Tringali, Swiss Water’s Chairman added, “This financing package is the product of an extensive review of all financing alternatives over the past six months undertaken in conjunction with an independent financial advisor. I would like to thank Iain as well as several of my fellow board members for their work and the substantial time devoted to negotiating the best possible deal for the Company.”
Full details of the Mill Road Amendment, including the analysis and deliberations of the Company’s directors and the directors’ recommendation to shareholders, will be set out in the Company’s Management Information Circular, which is expected to be sent to shareholders on or about May 31, 2021.
