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Note 13 - Convertible Debentures Payable
6 Months Ended
Nov. 30, 2024
Notes to Financial Statements  
Convertible Debentures [Text Block]

Note 13. Convertible debentures payable

 

The following table sets forth the net carrying amount of the convertible debentures payable:

 

  

November 30,

  

May 31,

 
  

2024

  

2024

 

5.20% Convertible Notes ("TLRY 27")

 $122,735  $129,583 

5.25% Convertible Notes ("APHA 24")

     330 

Total

  122,735   129,913 

Deduct - current portion

     330 

Total convertible debentures payable, non current portion

 $122,735  $129,583 

 

TLRY 27 Notes

 

  

November 30,

  

May 31,

 
  

2024

  

2024

 

5.20% Contractual debenture

 $172,500  $172,500 

Debt settlement

  (16,500)   

Unamortized discount

  (33,265)  (42,917)

Net carrying amount

 $122,735  $129,583 

 

The TLRY 27 convertible debentures were issued on  May 30, 2023 and on June 9, 2023 by way of overallotment, in the principal amount of $172,500 (the “TLRY 27 Notes”). The TLRY 27 Notes bear interest at a rate of 5.20% per annum, payable semi-annually in arrears on  June 15 and  December 15 of each year, and mature on  June 15, 2027, unless earlier converted. The TLRY 27 Notes are Tilray’s general unsecured obligations and rank senior in right of payment to all of Tilray’s indebtedness that is expressly subordinated in right of payment to the notes; equal in right of payment with any of Tilray’s unsecured indebtedness that is not so subordinated, including TLRY 23 and APHA 24, effectively junior in right of payment to any of Tilray’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables but excluding intercompany obligations) of Tilray’s current or future subsidiaries. Noteholders will have the right to convert their TLRY 27 Notes into shares of Tilray’s Common Stock at their option, at any time, until the close of business on the second scheduled trading day immediately before  June 15, 2027. The initial conversion rate is 376.6478 shares per $1,000 principal amount of TLRY 27 Notes, which represents a conversion price of approximately $2.66 per share. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events.

 

The TLRY 27 Notes will be redeemable, in whole and not in part, at Tilray’s option at any time on or after   June 20, 2025 at a cash redemption price equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price of Tilray’s Common Stock exceeds 130% of the conversion price for a specified period of time. If certain corporate events that constitute a fundamental change occur, then, subject to a limited exception, noteholders  may require Tilray to repurchase their TLRY 27 Notes for cash. The repurchase price will be equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. In connection with the Company’s offering of the TLRY 27 Notes, the Company entered into a share lending agreement with an affiliate of Jefferies LLC (the “Share Borrower”), pursuant to which it lent to the Share Borrower 38,500,000 shares of the Company’s Common Stock (the "Borrowed Shares"). The Borrowed Shares were newly-issued shares, will be held as treasury shares until the expiration or early termination of the share lending agreement and may be used by purchasers of the TLRY 27 Notes to sell up to 38,500,000 shares of the Company’s Common Stock. The fair value of the share lending agreement has been recorded as part of the unamortized discount on the debenture. The Company expects that the selling stockholders will use their position created by such sales to establish their initial hedge with respect to their investments in the TLRY 27 Notes. The Company did not receive any proceeds from the sale of the Borrowed Shares. 

 

On  September 12, 2024 and November 4, 2024, the Company exchanged $7,500 and $9,000 of its TLRY 27 Notes for cancellation, respectively, by issuing 10,034,635 Common Stock and paying $290 of cash to settle both principal and accrued interest. Upon exchanging the TLRY 27 Notes, a portion of the settlement consideration was allocated to the equity component of the instrument and was recognized as a $4,931 reduction of additional paid-in capital in the Consolidated Statements of Changes in Equity. Additionally, this repurchase resulted in a gain of $679 which was recorded in other non-operating (losses) gains, net as shown in Note 24 (Non-operating income (expense)). Following consummation of the exchange, the number of outstanding Borrowed Shares of Common Stock was reduced by 3,682,609 shares which were then returned as Treasury Stock. As of  November 30, 2024 and May 31, 2024, a total of 34,817,391 and 38,500,000 shares remained outstanding under the share lending arrangement, respectively. 

 

During the three and six months ended November 30, 2024, the Company recognized interest expense of $2,133 and $4,375 and accretion of amortized discount interest of $2,919 and $5,985 respectively. During the three and six months ended November 30, 2023, the Company recognized interest expense of $2,423 and $4,485 and accretion of amortized discount interest of $2,829 and $5,624. 

 

As at  November 30, 2024, there was $156,000 principal outstanding compared to $172,500 principal outstanding as at May 31, 2024.

 

APHA 24 Notes

 

  

November 30,

  

May 31,

 
  

2024

  

2024

 

5.25% Contractual debenture

 $  $350,000 

Debt settlement

     (349,670)

Fair value adjustment

      

Net carrying amount

 $  $330 

 

The APHA 24 convertible debentures, were entered into in April 2019, in the principal amount of $350,000, bore interest at a rate of 5.25% per annum, and were payable semi-annually in arrears on June 1 and December 1 of each year, and matured on June 1, 2024 (the "APHA 24 Notes"). On June 1, 2024, the Company repaid the remaining principal of the APHA 24 Notes in cash upon maturity.