Due to, among other things, margin pressures caused by the fragmentation of the overall cannabis industry, general operational and financial underperformance, and financial pressures resulting from obligations owing to creditors, the Zenabis Group has been unable to generate positive cash flows and it has consistently incurred cumulative losses. In addition, the Zenabis Group has significant obligations and liabilities owing to its senior secured creditor and its unsecured creditors that it is no longer able to meet. After careful consideration of all available alternatives, the Board of Directors of each of the members of the Zenabis Group determined that it was in the best interest of the Zenabis Group and all stakeholders to file for an application for creditor protection under the CCAA.
The initial Court order sought is expected to provide a stay of creditor claims and the exercise of contractual rights to give the Zenabis Group the time and stability required to explore the sale of assets to facilitate the definitive resolution and settlement of outstanding matters with its senior secured creditor and implement any other restructuring options that may allow it to maximize the value of its assets for the benefit of its creditors and other stakeholders.
As part of the CCAA application, the Corporation will seek approval of the appointment of Ernst and Young Inc. as the Monitor to oversee the CCAA proceedings and report to the Court.
Concurrently with the filing, the Zenabis Group has entered into an Agreement for Purchase and Sale (the “APS”) with its senior secured creditor, 2657408 Ontario Inc., a wholly-owned subsidiary of Sundial Growers Inc. The petition also requests that the Monitor be authorized to run a sale and investment solicitation process (“SISP”) with the authority to use the APS as a stalking horse in order to provide interested parties with the opportunity to submit superior proposals and to enable the Zenabis Group to determine the highest and best available transaction for Zenabis and its stakeholders.
Further news releases in respect of the CCAA process will be provided on an ongoing basis as necessary.
This press release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws (“Forward-Looking Statements”), including with respect to the CCAA application and proceedings, the sale of assets of the Zenabis Group, the settlement of outstanding matters with the Zenabis Group’s senior secured creditor and the restructuring of the Zenabis Group. Forward-Looking Statements are based on certain expectations and assumptions and are subject to known and unknown risks and uncertainties and other factors that could cause actual events, results, performance and achievements to differ materially from those anticipated in these Forward-Looking Statements. Forward-Looking Statements should not be read as guarantees of future performance or results. Readers are cautioned not to place undue reliance on these Forward-Looking Statements, which speak only as of the date of this press release. The Corporation disclaims any intention or obligation, except to the extent required by law, to update or revise any Forward-Looking Statements as a result of new information or future events, or for any other reason.
For further information, please contact:
Ernst & Young Inc.
900 Boul. de Maisonneuve O., Bureau 2300
Montréal, Québec, H3A 0A8