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Final Bell Holdings International Ltd. Enters Into Us$25 Million Term Loan Facility And Provides Corporate Update

VANCOUVER, BC / ACCESSWIRE / August 18, 2022 / Final Bell Holdings International Ltd. (the “Company“) is pleased to announce today that it has entered into a loan agreement (the “Loan Agreement“) dated August 17, 2022 with Golden Iris International Limited (the “Lender“), which provides for a senior secured term loan facility of US$25 million (the “Term Loan“). The Term Loan is guaranteed by Final Bell Holdings Inc. (“FBH“), Final Bell Canada Inc. (“FB Canada“) and various affiliates thereof (collectively, the “Guarantors“), and will be secured by a first ranking security interest in substantially all of the Company’s and the Guarantors’ assets.

The proceeds of the Term Loan will be used by the Company to repay the outstanding senior secured convertible notes of the Company due 2022 (the “Secured Notes“) plus all accrued interest, costs and expenses related thereto, including the previously announced amendment fee, finance growth initiatives, pay the cash portion of the purchase price for the acquisition of FB Canada, and provide for ongoing working capital requirements.

Although all conditions precedent for the Term Loan have been satisfied, funding of the Term Loan has been delayed pending completion of certain internal administrative requirements of the Lender. The Lender has confirmed to the Company that funding in full of the Term Loan shall occur in short order, and in any case within the next two weeks. As a result of these delays, the Company has been unable to repay the amounts owing on the Secured Notes by their maturity date of August 17, 2022. While this constitutes an event of default under the terms of the indenture governing the Secured Notes dated as of November 17, 2021, as amended and supplemented (the “Secured Notes Indenture“), the Company has been in close discussions with the holders of the Secured Notes and their trustee in order to provide assurances that the refinancing package is secure and the Secured Notes will be repaid shortly. While there are no assurances that the holders of the Secured Notes will refrain from seeking enforcement under the terms of the Secured Notes Indenture, the Company believes that it has made the necessary arrangements to repay all amounts owing and will provide an update when this has been completed.

Corporate Update

While the Guarantors have demonstrated that they continue to execute their business plan and grow their customer base across Canada and California, unfavourable public equity market conditions have proven challenging for the Company over the last several months, which have necessitated a change in strategic direction in respect of the previously announced business combination (the “Business Combination“) with FBH, FB Canada and 14th Round Inc. (“14R“). As a result, the parties have entered into amendments to the following: (i) the proposed business combination with FBH pursuant to the share exchange agreement with FBH and the shareholders of FBH dated as of October 12, 2021, as amended (the “SEA“); (ii) the acquisition of FB Canada pursuant to the share purchase agreement with FB Canada and its shareholders dated as of January 26, 2022 (the “FB Canada SPA“); and (iii) the merger with 14R pursuant to the definitive agreement and plan of merger with 14R and the shareholders of 14R dated as of January 17, 2022 (the “14R Merger Agreement“, and together with the SEA and the FB Canada SPA, the “RTO Agreements“).

These amendments reflect an updated valuation of the pro forma consolidated Final Bell Group of US$250 million and an agreement to now close the RTO Agreements and complete the Business Combination prior to seeking a listing on the Canadian Securities Exchange (the “CSE“). Notwithstanding, the Company remains steadfast in its commitment to completing its stock exchange listing and provide liquidity to its shareholders once markets stabilize and support a market valuation of the Final Bell Group that is more in line with the intrinsic value of the business.

With the funding of the new Term Loan, the Company believes it will be adequately capitalized while it completes the transactions contemplated by the RTO Agreements and pursues its stock exchange listing under more favourable public equity market conditions. The Company also intends, following funding of the Term Loan and repayment of the Secured Notes, to seek approval from the holders of its unsecured convertible notes due 2024 (the “Unsecured Notes“) to amend the indenture governing such Unsecured Notes in order to accord with the updated timeline.

Although the Company is required to close the RTO Agreements by November 30, 2022 under the terms of the Loan Agreement, it intends to expeditiously proceed with all closing arrangements with the aim of completing the Business Combination under the amended structure in the third quarter of 2022.

Under the updated framework, upon completion of the Business Combination, the Company’s board of directors will consist of nominees of the current management of the Company, FBH and the Lender, and shareholders of FBH will enter into voting trust agreements for the purpose of maintaining the composition of the Company’s board of directors, which agreements shall expire at the time of a stock exchange listing of the Company’s shares. Further details will be announced upon closing of the RTO Agreements.

Other than eliminating the requirement to complete a listing on the CSE concurrent with the completion of each such acquisition, the RTO Agreement amendments more specifically provide for the following:

● The SEA has been amended to provide for a new exchange ratio of approximately 0.696 newly created proportionate voting shares of the Company for each share of FBH;

● The 14R Merger Agreement has been amended to provide for a new aggregate purchase price based on the new deemed valuation of the Company after giving pro forma effect to the completion of the transactions contemplated by the RTO Agreements;

● The FB Canada SPA has been amended to provide for the purchase price to be paid as follows:

  1. $3,350,000 in cash;
  2. $1,650,000 by way of promissory notes to the shareholders of FB Canada, which shall not be interest bearing and shall become due and payable immediately upon the earlier of (A) the date that is 15 months from the date of closing of the FB Canada SPA; and (B) the completion of a capital raise by the Company of $5,000,000 or more following closing of the FB Canada SPA; and
  3. $5,000,000 in subordinate voting shares of the Company based on the new deemed valuation of the Company after giving pro forma effect to the completion of the transactions contemplated by the RTO Agreements, subject to adjustment in the event that the Company issues shares in connection with a future stock exchange listing, or is otherwise acquired prior to such listing, at a valuation of less than US$250 million.

Additional Terms of the Loan Agreement

The Term Loan has a maturity date of August 18, 2025 (the “Maturity Date“) and will bear interest from and including the funding date at a rate of 12.0% per annum (the “Interest Rate“), the first half of which (6.0% per annum) is payable quarterly, and the second half of which (6.0% per annum) accrues quarterly and is due and payable on the Maturity Date or earlier repayment in full of the Term Loan.

The Loan Agreement includes a condition subsequent that the Company must complete, on or before November 30, 2022, each of the RTO Agreements, as amended, in order to form a consolidated holding company domiciled in Canada.

The Loan Agreement also provides for an incentive payment to the Lender in an amount equal to the full amount of the Term Loan plus interest thereon (the “Incentive Payment“), which will be satisfied through the issuance of a share purchase warrant (the “Lender Warrant“) following funding and another Lender Warrant on equivalent terms following repayment of the Term Loan in respect of the second half of the interest rate accrued to such time. The Lender Warrants shall have a three year term and shall be exercisable following the closing of the RTO Agreements. The holder shall have the right to apply any outstanding principal balance of the Term Loan to offset the exercise price of the Lender Warrants. The Lender Warrants shall be subject to a statutory hold period expiring four months and one day from the date of issuance, pursuant to applicable Canadian securities laws. Further pricing details of the Lender Warrants shall be announced once the Term Loan has been funded.

Amendments to Outstanding Warrants

As a result of the change in the Company’s strategy to complete the RTO Agreements and delay listing on the CSE, the Company has sought consents from the holders of the Company’s contingent share purchase warrants (the “Existing Warrants“) that were issued to the holders of the Secured Notes to, among other things, reduce the exercise price of the Existing Warrants to $0.92 per share and delay the Exercise Trigger Date (as defined in the indenture governing the Existing Warrants dated as of November 17, 2022 (the “Warrant Indenture“)) in order to coincide with the closing of the RTO Agreements on or before November 30, 2022 (the “Amendments“). The reduced exercise price represents a 20% discount to the deemed per share price of the Company assuming the completion of the RTO Agreements at the new valuation. All holders of the Existing Warrants have consented to the Amendments. The Amendments will be reflected in a supplement to the Warrant Indenture that will be entered into upon repayment of the Secured Notes.

About Final Bell Holdings International Ltd.

The Company’s shares were voluntarily delisted from the NEX Board of the TSX-V on April 30, 2021. Prior to entering into the investment agreement announced in the Company’s press release dated May 11, 2021, the Company was inactive and seeking to acquire or otherwise transact with a new business or company. On October 14, 2021, the Company announced that it had entered into the SEA in connection with a proposed business combination between the Company and FBH. Please see the Company’s October 14, 2021 press release for further information.

For further information please contact:

Kay Jessel
Chief Executive Officer
604.365.6099
[email protected]

Forward-Looking Information

This press release contains certain “forward-looking information” within the meaning of applicable securities law. Forward looking information is frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “would”, “potential”, “proposed” and other similar words, or statements that certain events or conditions “may” or “will” occur and in this press release include, but is not limited to, statements respecting: the expected use of proceeds from the Term Loan; the timing of funding of the Term Loan and repayment of the amounts owing on the Secured Notes; expectations relating to enforcement actions by the holders of the Secured Notes; the completion of the Business Combination and closing of the RTO Agreements by November 30, 2022, or at all; the completion of the Company’s stock exchange listing; receipt by the Company of approval from the holders of the Unsecured Notes to amend the indenture governing such notes; business developments relating to the Final Bell Group of companies; and the development of the Company’s business and its financial results. These statements are only predictions and should not be read as guarantees of future performance or results. Forward-looking information is based on the current expectations, beliefs, opinions, estimates and reasonable assumptions of management at the date the information is provided, and is subject to a variety of known and unknown risks and uncertainties and other factors that could cause actual events, results, performance and achievements to differ materially from those projected in the forward-looking information. The Company undertakes no obligation to update forward-looking information if circumstances or management’s expectations, beliefs, opinions, estimates or assumptions should change, unless required by law. The reader is cautioned not to place undue reliance on forward-looking information.

SOURCE: Final Bell Holdings International Ltd.

View source version on accesswire.com:
https://www.accesswire.com/712680/Final-Bell-Holdings-International-Ltd-Enters-Into-Us25-Million-Term-Loan-Facility-And-Provides-Corporate-Update

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