Under the terms agreed to between Delta 9 and the Bank, there will be four separate loan segments, each of which is allocated for a different purpose, and each with its own terms:
- A demand operating loan of $2,000,000 to be used to finance day-to-day operations. Interest will float at a rate of 1.00% per annum above the Bank's prime lending rate, which at the current time is 3.45% per annum.
- A demand revolving loan of $4,500,000 which is intended to assist in financing the purchase of Delta 9's current production facility. Interest will initially float at 1% above prime, but the Bank will use its best efforts to obtain funds on a fixed rate acceptable to Delta 9 and the Bank, which is intended to be at between 4.68% per annum for a one year term up to 5.45% per annum for a five year term.
- A demand non-revolving loan of $4,500,000 to assist in the purchase of lands adjacent to the Company's current production facility. Interest will float at a rate of 1.00% per annum above prime, with fixed rate pricing subject to negotiation up to the date of draw down.
- A non-revolving credit facility of $1,000,000 for the purchase or lease of equipment required for the operation of the Company's business. Interest will float at a rate of 1.75% above prime, with fixed rate pricing to be the subject of negotiation up to the date of draw down.
"We are very pleased to have reached agreement on this loan facility," said Delta 9 CFO Brent Bottomley. "Our Company is aggressively expanding to increase our reach in Canada and abroad, although equity markets for cannabis issuers in general have pulled back from highs reached early in 2018. In order to preserve shareholder value over the long term, it was important to us to find a non-dilutive source of capital to help finance our growth."
Delta 9 CEO John Arbuthnot says the loan agreement marks a shift in the thinking of chartered banks about the cannabis industry.
"This agreement shows real confidence in our Company's business operations, but also a shift in attitude toward our entire industry, as we approach the full legalization of recreational cannabis in October," Arbuthnot says. "More importantly, this debt facility combined with our $23 million prospectus financing which closed last December makes us fully funded for the execution of our business plan in 2019."
The closing of the definitive loan agreement is subject to final due diligence by the Bank.
About Delta 9 Cannabis Inc.
Delta 9's wholly-owned subsidiary, Delta 9 Bio-Tech Inc., is a licensed producer of medical marijuana pursuant to the ACMPR and operates an 80,000 square foot production facility in Winnipeg, Manitoba, Canada. Delta 9's shares trade on the TSX Venture Exchange under the symbol "NINE".
SOURCE
Read More