A debt settlement with a key shareholder and a share placement will help Big Rock Brewery build “a profitable, sustainable and growing company”, the Canadian brewer has said.
Big Rock has struck a binding debt settlement deal with VN Capital, its largest shareholder and lender, and has set out plans for a placement of shares in the business.
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The debt agreement with VN Capital, which owns just under 29% of Big Rock, will settle all outstanding debt under the brewer’s second lien term facility.
Under the terms of the deal, C$9m ($6.3m) of the debt will be converted into nine million common shares, with the conversion price matching the per share price of the upcoming private placement of stock.
The remaining debt will be repaid using proceeds from the private placement, which Big Rock said is expected to raise between C$6.3m and C$8m.
In November, the brewery expanded its second lien financing arrangement with VN Capital by C$500,000 and extended the maturity date to 31 March 2025.
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By GlobalDataThroughout the third and fourth quarters of 2024, Big Rock said it “actively sought out financing partners and considered multiple strategies to source the requisite equity capital to fund its obligations.”
The company engaged in discussions with private-equity parties and investment banks to address its financial challenges.
Despite its efforts, the company could not secure sufficient interest to fully meet its obligations under the second lien facility.
The debt settlement is contingent on completing the minimum private placement, which will result in the issuance of approximately 90% of Big Rock’s current shares. The shares to go to VN Capital as part of the debt deal amount to around 128.6% of the brewer’s shares.
Following the transaction, VN Capital is expected to control around 45.9% to 49.4% of Big Rock’s shares.
The private placement, together with the debt settlement, is expected to improve Big Rock’s balance sheet by removing approximately C$11.3m of outstanding secured debt and eliminating annual interest expenses of about C$1.4m.
The additional gross proceeds of approximately C$6.3m will be used to repay C$700,000 of indebtedness under its senior credit agreement with ATB Financial, for investment in capital projects, and for working capital.
“The private placement, together with the debt settlement, will provide Big Rock with immediate balance sheet improvement and put Big Rock in a position to be able to work to create a profitable, sustainable and growing company, for the benefit of shareholders, employees and all other stakeholders,” Big Rock said in a statement.
For the nine months ending 30 September, Big Rock reported a 2.9% decline in net revenue to C$33.7m.
This was mainly due to reduced co-packing activity and lower wholesale volumes, although increased co-packing activity in the third quarter partially offset the decline. Wholesale sales volumes fell by 6% to 114,575 hectolitres.
Big Rock’s operating loss widened to C$3.3m from C$0.1m, while the net loss increased to C$3.8m from C$0.8m.
In July, Big Rock closed its micro-brewery and taproom in Vancouver.
