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Cronos Group Inc. (TSXV:MJN) (OTC:PRMCF) announced today that it has entered into a commitment letter for $40 million in debt financing from Romspen Investment Corporation to fund the ongoing construction of its 315,000 sq. ft. facility expansion that they announced back on May 23, 2017.
Cronos Group is already a major player in the Canadian cannabis space, positioning itself as a geographically diversified cannabis company that operates two wholly-owned Licensed Producers and holds a portfolio of minority investments in other Licensed Producers. Romspen currently manages one of the largest non-bank commercial and industrial mortgage investment entities in all of Canada, with a portfolio in excess of $1.7 billion CAD.
Under the commitment letter, Romspen has agreed to provide the $40 million senior secured facility to Cronos Group's wholly-owned licensed producer, Peace Naturals Project Inc. The loan is secured by a first mortgage on the real estate of both Peace Naturals and In The Zone Inc. In The Zone, Hortican Inc., and Cronos are also guarantors of the loan. Under the loan, Cronos Group retains its ability to enter into equipment financing arrangements.
The loan will be made available in multiple advances which are expected to begin in September 2017. Advances will be subject to ongoing conditions, including Romspen's approval of construction progress. The loan bears interest at a rate of 12% per year on advances made, has a 2 year term with a one-year extension option, and is pre-payable on one-month's notice.
"Given the speed at which we anticipate payback of investment in the New Peace Facility, we prioritized accessing the debt markets to fund this domestic expansion. We always look for ways to enhance shareholder value and we're pleased to be able to work with Romspen again to deliver that value," said Mike Gorenstein, CEO of Cronos.
Cronos Grants Options
Additionally, Cronos granted options for 2,903,000 common shares to certain employees and directors in accordance with the company's stock option plan. The options are exercisable at a price of $2.42 per common share, which was the closing price of Cronos' common shares on the TSXV on August 23, 2017.
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