Order Stays Creditors and Litigation
Plaintiffs from Enforcing Claims
VAUGHAN, ON, March 31, 2020 /PRNewswire/ - CannTrust Holdings
Inc. ("CannTrust" or the "Company", TSX: TRST, NYSE: CTST)
announced today that the Company has obtained an order (the
"Initial Order") from the Ontario Superior Court of Justice
(Commercial List) (the "Court") granting protection under the
Companies' Creditors Arrangement Act (Canada) ("CCAA"). In accordance with the
Initial Order, all creditors of CannTrust, CannTrust Inc., CTI
Holdings (Osoyoos) Inc., and
Elmcliffe Investments Inc. (the "Applicants"), as well as the
plaintiffs in the putative class actions and other litigation
brought against the Applicants, will be stayed from enforcing their
claims. The Initial Order provides for a stay of proceedings in
favour of the Applicants for an initial period of 10 days, subject
to such extensions as the Court may subsequently order, and the
appointment of Ernst & Young Inc. as Monitor in the CCAA
proceedings.
After reviewing a number of options, CannTrust's Board of
Directors determined that commencing CCAA proceedings is in the
Company's best interests. The Company hopes to exit CCAA protection
well-positioned to rebuild its stakeholders' trust and deliver
high-quality, innovative products to its patients and
customers.
Pursuant to the Initial Order, the Court has granted a stay of
proceedings that will allow CannTrust to, among other
things:
- Complete the remainder of CannTrust's remediation plan for its
Vaughan Facility without disruption and submit the related evidence
package to Health Canada;
- Continue to work with Health Canada to resolve any remaining
Cannabis Act compliance issues, with a view towards
reinstating CannTrust's licenses for its Niagara and Vaughan facilities and restoring
operations;
- Explore a CCAA plan of compromise or arrangement as a means for
addressing the multiple putative class actions and other litigation
brought against CannTrust in several jurisdictions, seeking to
resolve all of the claims and contingent claims against the Company
in a single forum; and
- Facilitate the completion of the Board of Directors' review of
strategic alternatives (the "Strategic Process"), including the
solicitation, development and execution of any potential sale or
other strategic transaction involving CannTrust, whether in
addition to, or as an alternative to, a CCAA plan of compromise or
arrangement.
Despite the efforts by CannTrust's management and Board of
Directors to preserve the Company's cash liquidity while seeking to
restore the Company to operations and resolve the multiple
litigations and other contingent claims facing the Company, the
Company's future remains uncertain. Without its cannabis licenses,
the Company has been unable to generate any meaningful revenue
since June 2019. The Company has not
filed any financial statements subsequent to its interim unaudited
comparative financial statements for the three months ended
March 31, 2019, which, together with
its financial statements for the year ended December 31, 2018, are subject to restatement.
Furthermore, the effects of the COVID-19 pandemic have exacerbated
what were already difficult circumstances, introducing potential
delays in Health Canada's ability to review the Company's
applications for reinstatement of its Niagara and Vaughan licenses and making it even more
challenging for CannTrust to attract new financing or a strategic
partner.
CannTrust is expending significant time and money pursuing the
completion of its remediation plan and defending the putative class
actions against the Company in multiple jurisdictions. There
can be no assurance that Health Canada will reinstate CannTrust's
licenses or that the Company's litigation will be resolved in the
near term or on a basis that will leave the Company with sufficient
financial resources to resume operations. At present, and in light
of seeking CCAA protection, its reduced liquidity position and the
contingent claims it is facing, the Company does not intend to
devote additional time or money towards curing its public
disclosure defaults by completing and resuming the filing of
required reports under Canadian and United States securities laws. As
of March 20, 2020, CannTrust had a cash balance of
approximately $145 million. If Health Canada elects to
reinstate CannTrust's cannabis licenses, it would take several
months for the Company to begin earning revenue and the Company
would require significant working capital to restore its operations
and return to profitability. Similarly, there can be no assurance
that the Strategic Process will result in any transaction, and
there can be no assurance that the Strategic Process or the outcome
of the CCAA proceeding will provide any residual value for the
benefit of holders of the Company's Common Shares.
Trading in CannTrust's common shares (the "Common Shares") on
the Toronto Stock Exchange (the "TSX") and New York Stock Exchange
(the "NYSE") has been halted and the Company expects that, as a
result of having filed for protection under the CCAA, the Common
Shares will soon be delisted from trading on the TSX and NYSE. In
addition, CannTrust anticipates that, as a result of the Company's
filing for protection under the CCAA, its pending delisting by the
TSX and NYSE, and its continuing default of its disclosure
obligations under applicable securities laws, provincial securities
regulators in Canada will issue a
cease trade order to prevent any trading in the Common Shares in
Canada.
A comeback hearing in respect of the relief granted pursuant to
the Initial Order will be scheduled within ten days (the
"Comeback Hearing"). Interested parties that wish to
bring a motion at the Comeback Hearing are required to provide
notice to the affected parties prior to the Comeback Hearing
pursuant to the requirements set forth in the Initial Order.
A copy of the Initial Order and other information will be
available on the Monitor's website at
http://www.ey.com/ca/canntrust.
Forward-Looking Statements
This press release contains "forward-looking information" within
the meaning of Canadian Securities laws and "forward-looking
statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and other
applicable United States safe harbor laws, and such
statements are based upon CannTrust's current internal
expectations, estimates, projections, assumptions and beliefs and
views of future events. Forward-looking information and
forward-looking statements can be identified by the use of
forward-looking terminology such as "believes", "expect",
"likely", "may", "will", "should", "intend", "anticipate",
"potential", "proposed", "estimate" and other similar words,
including negative and grammatical variations thereof, or
statements that certain events or conditions "may", "would" or
"will" happen, or by discussions of strategy.
The forward-looking information and statements in this news
release include statements relating to the Company's CCAA
proceedings, Strategic Process, any residual value for the benefit
of holders of the Company's Common Shares, the delisting of the
Common Shares from the TSX and NYSE, the corrective actions being
taken by the Company, and Health Canada's pending determinations.
Forward-looking information and statements necessarily involve
known and unknown risks, including, without limitation: the outcome
of the CCAA proceedings or the Strategic Process; actions taken in
respect of the Company's products by its customers and regulators;
results of Health Canada's investigation, including orders and
compliance measures required by Health Canada and their impact on
the operations, inventory, assets and financial condition of the
Company; the Company's implementation of remediation plans and
related actions; regulatory approval; the outcome of the
Company's contingent liabilities; the impact of potential
regulatory investigations; risks associated with general economic
conditions; the impact on the Company of the COVID-19 pandemic;
adverse industry events; loss of markets; future legislative and
regulatory developments in Canada, the United
States and elsewhere; the cannabis industry
in Canada generally; and, the ability of CannTrust to
implement its business strategies.
Any forward-looking information and statements speak only as of
the date on which they are made, and, except as required by law,
CannTrust does not undertake any obligation to update or revise any
forward-looking information or statements, whether as a result of
new information, future events or otherwise. New factors emerge
from time to time, and it is not possible for CannTrust to predict
all such factors. When considering these forward-looking
information and statements, readers should keep in mind the risk
factors and other cautionary statements in CannTrust's Annual
Information Form dated March 28, 2019 (the "AIF") and
filed with the applicable Canadian securities regulatory
authorities on SEDAR at www.sedar.com and filed as an
exhibit to CannTrust's Form 40-F annual report under the United
States Securities Exchange Act of 1934, as amended, with the United
States Securities and Exchange Commission on EDGAR
at www.sec.gov (the "March 2019 Form 40-F"). The
risk factors and other factors noted in the AIF could cause actual
events or results to differ materially from those described in any
forward-looking information or statements. Readers are also
reminded that CannTrust remains in default of its periodic
disclosure requirements under applicable securities laws and stock
exchange requirements, that its most recent AIF, Form 40-F and
other disclosures do not reflect all risk factors that currently
face the Company, and that such risk factors have not been updated
or revised since the date of filing of such documents, and that the
Company has not completed or filed the restatements of the
financial statements included in the AIF or the March
2019 Form 40-F or otherwise filed an amendment to such Form
40-F. As noted in this press release, in light of seeking CCAA
protection and other factors, at present, the Company does not
intend to devote additional time or money towards curing its public
disclosure defaults by completing and resuming the filing of
required reports under Canadian and United States securities laws.
The TSX and NYSE do not accept responsibility for the adequacy
or accuracy of this release.
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SOURCE CannTrust Holdings Inc.