TGOD stock is down on Thursday despite The Green Organic Dutchman Holdings (TSX:TGOD) (OTCQX:TGODF) announcing that it had secured $103 million CAD in funding in order to continue its expansion strategy.
Uncertainty Weighs on TGOD Stock
TGOD shares had been tanking in recent weeks amidst increasing uncertainty regarding its cash-flow position. The stock hit a year-low towards the end of October after The Green Organic Dutchman listed its unfinished Ancaster facility in the market, but failed to attract any buyers. However, as per today's statement, the company has successfully secured $23 million CAD in funding through a sale-leaseback arrangement for the facility. This deal will carry a 10-year term, after which the company can repurchase the site for $1 CAD.
"Our ability to raise capital, despite recent headwinds affecting the entire sector, is a clear show of confidence from our financial partners," said CEO Brian Athaide."It is reflective of the value of our significant assets, the trust investors are putting into TGOD's strong corporate governance, transparency and accountability, and the opportunity for the company's unique positioning to quickly capture and grow the organic segment." Despite securing the much-needed capital, TGOD stock is down 6.5% in Toronto.
Mortgage Terms
The company has also secured $40 million CAD by way of a construction mortgage loan agreed with an investment fund. The mortgage is secured on both the Ancaster site and its Valleyfield, Quebec site. However, of this $40 million CAD, $15 million CAD will be payable upon closing with an additional $25 million CAD advance available upon reaching certain operational milestones in 2020. The loan carries a 12% interest rate over an initial term of two years, and it is perhaps the terms of this deal that are driving losses in TGOD stock today.
The Green Organic Dutchman has also entered into a term sheet with an investment fund for a $30 million USD (approx $40 million CAD) note with a 5% coupon, convertible into common shares of TGOD stock. Under the terms, TGOD would receive $10 million USD upon closing with $20 million USD immediately placed in escrow, to be released as the note is converted into common shares.
The raised capital will be used to complete construction on the Ancaster processing facility and to finish six zones at the Valleyfield facility, where the company has decided to segment the construction process. The funds will also be used to bridge the company until it turns cash-flow positive, as it aims for national distribution of its products early next year. TGOD shares are currently trading for $0.86 on the Toronto Stock Exchange.
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