Althea has sold its property in Canada for CAD$4.6 million (A$5.32m) in a deal that will wipe out the company’s debt and strengthen its balance sheet, chief executive Josh Fegan has said.
But the sale will also lead to a write down of $4.3m that will impact its FY24 results.
However, Fegan told Cannabiz the benefits of realising the asset now “far outweigh the statutory impact on paper”.
Under the deal announced to the ASX, institutional investor Obsidian Global will buy the Ontario property and immediately lease it back to Althea’s recreational division, Peak Processing Solutions, for at least 15 years.
Peak will also retain ownership of all the “valuable assets”, Fegan said, including manufacturing and extraction machinery and intellectual property.
Althea said the deal will enable it to wipe out the CAD$2m loan facility it struck with Obsidian earlier this year and strengthen its balance sheet. Net proceeds of A$1.2m will be added to the A$3.6m cash that Althea had at its disposal as at September 30, the company said.
The deal struck in February saw New York-based Obsidian fund Althea through convertible notes, an agreement which has now been terminated. The cash repayment will total US$1.23m – funded through proceeds of the sale – US$52,500 more than the aggregate face value of the notes, Althea said in a statement.
As part of the transaction, Obsidian will be issued with 614,057 ordinary shares.
Fegan, noting the “very challenging financial market conditions”, told Cannabiz: “Capital can be scarce and expensive nowadays. The property sale releases a significant amount of cash and enables us to pay out our debt, while returning order to our share structure. In other words, we now have a clean sheet, are cashflow positive and have strong sales growth. In my opinion, this is an excellent time to become an AGH shareholder.
“The write down will impact our FY24 results. However, the company believes the benefits of realising the asset now far outweigh the statutory impact on paper.”
The firm said the write down reflects the “difference between the sale price and the current carrying value of the building”.
Althea, which acquired the property for CAD$2.6m in 2019, will lease it back for CAD$524,000 per year for the first five years, rising to CAD$576,000 and CAD$622,000 for each of the next two five-year renewal periods.
Shares in Althea climbed 5.55% yesterday to open this morning at A$0.038c per share.