Imperial Brands converts CA$123 million in debt to Auxly Cannabis shares

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Imperial Brands has converted more than 123.4 million Canadian dollars ($90.6 million) in total debt to shares of Auxly Cannabis Group, formally giving the British tobacco giant a 19.8% ownership position in the Toronto-based marijuana company.

Auxly on Monday announced the completion of the conversion of CA$123.4 million of principal and accrued interest under the 4% unsecured convertible debenture that was due in September 2026.

Imperial converted CA$121.9 million of the principal amount outstanding under the debenture for 150,433,450 common shares at an exercise price of 81 Canadian cents per, according to a news release.

Roughly CA$1.56 million of accrued interest was converted into another 90,882,667 shares at a price of CA$0.17 per.

The two companies also agreed to remove the existing requirement that Imperial use Auxly as its exclusive cannabis partner.

Imperial first struck a deal with Auxly in 2019.

“We appreciate the continued support of our strategic partner Imperial who we now also welcome as our largest shareholder,” Auxly CEO Hugo Alves said in a statement.

“The conversion improves the financial position of the company by eliminating CA$123 million in debt and is expected to reduce our (pro forma) 2024 annual interest and accretion expense by approximately CA$14 million.

“This is fantastic news for Auxly; we will continue to look for ways to strengthen our balance sheet and remain focused on delivering profitable growth with quality products and incredible teamwork.”

Auxly shares trade as XLY on the Toronto Stock Exchange.