Ten Peaks Coffee Company Inc. (TSX:TPK) (“the Company” or “Ten Peaks”) today announced that it has entered into a subscription agreement with Mill Road Capital II, L.P. (“Mill Road Capital”) pursuant to which Mill Road Capital will purchase, and Ten Peaks will sell, an unsecured subordinated convertible debenture (“Convertible Debenture”) in the amount of 15,000,000.
The Convertible Debenture will bear interest at a rate of 6.85% over its 7-year term and will be convertible into Common Shares of the Company at a conversion price of $8.25 per Common Share.
Under the terms of the agreement, Ten Peaks will have the option to pay interest-in-kind for the first two years. If elected, this option will increase the principal sum by the interest owing.
The Convertible Debenture will also include a net share settlement feature (“Net Share Settlement“) that allows Ten Peaks, upon conversion, to elect to pay cash equal to the face value of the Convertible Debenture and to issue Common Shares equal to the excess value of the underlying equity above the face value of the Convertible Debenture.
If the Net Share Settlement option is elected, it will result in fewer Common Shares being issued.
The net proceeds of the Offering will be used for growth opportunities including the construction of a new production line.
“We are pleased to enter this transaction with Mill Road Capital, which has been an investor in Ten Peaks for several years,” said Frank Dennis, President and CEO of Ten Peaks.
“This convertible sub-debt will provide us with the long-term capital we need to fund the next stage of our expansion plans, while maintaining a prudent capital structure.
We are now well positioned to finance construction of the new production line we need to meet growing global demand for our SWISS WATER® Process coffees. The new capacity is expected to come on line in mid-2018.”
“As a longtime shareholder, we are pleased to be able to support Ten Peaks as it invests in a new, state of the art facility,” said Scott Scharfman, a Managing Director at Mill Road Capital.
“This significant increase in our investment in Ten Peaks demonstrates our confidence in the Ten Peaks management team and the high quality, chemical free SWISS WATER® Process they have spent decades perfecting.”
Closing of this transaction is expected to occur on or about October 11, 2016 and is subject to regulatory approval including that of the Toronto Stock Exchange.
This news release does not constitute an offer of securities for sale in the United States. The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and such securities may not be offered or sold within the United States absent U.S. registration or an applicable exemption from U.S. registration requirements.
Ten Peaks is a publicly traded company that owns all of the interests of the Swiss Water Decaffeinated Coffee Company Inc. (SWDCC), a premium green coffee decaffeinator located in Burnaby, BC.
It also owns and operates Seaforth Supply Chain Solutions Inc. (Seaforth), a green coffee handling and storage business located in Metro Vancouver.
