Canada’s GreenSpace Brands is soliciting a sale of its Love Child Organics baby-food brand as the loss-making business embarks on a restructuring exercise.
The Toronto-listed company has outlined what it calls a ‘stalking horse agreement’ with its “senior” lender, Pivot Financial, with a view to selling the brand, along with a separate financing package and a so-called stay of proceedings with the creditor.
GreenSpace Brands, which reported a third-quarter loss of CAD1.3m ($964.5m) in February, announced last summer it was exploring strategic alternatives after launching its Project Fit cost-savings programme the previous year.
Love Child, if a sale is successful, would join two other completed divestitures – Kiju organic juices and the Rolling Meadow Dairy brand. The company would be left with the Central Roast snack brand and the Go Veggie cheese line.
The company said it has obtained an ‘initial order’ from the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act (CCAA) that includes a stay of proceedings for ten days from 6 April. The court also approved a debtor-in-possession financing facility, or DIP loan, from Pivot.
Pivot will initially advance CAD400,000 to GreenSpace Brands as part of the CAD2.6m DIP facility, with further withdrawals to be approved by the court at a ‘comeback hearing’ on 14 April. At that meeting, the company will seek to extend the stay of proceedings until 16 June and gain approval for a sale and investment solicitation process (SISP) relating to Love Child.
In a statement, GreenSpace Brands said its board has opted to “commence CCAA proceedings and pursue the SISP, with the support of Pivot, after careful review and consideration of viable alternatives, and upon consultation with the company’s professional advisors, having consideration for the company’s challenging financial circumstances and pending debt maturities, among other things”.
The company added that its strategic review launched last June “did not yield any executable transactions of its Central Roast and Go Veggie businesses”.
GreenSpace Brands generated CAD5.4m in revenue in its fiscal third quarter, an increase of 15.6% from a year earlier as the business raised prices with customers to help counter elevated input costs.
Losses from continuing operations narrowed to CAD1.3m from CAD1.6m, while adjusted EBITDA was a negative CAD0.5m.
President and CEO Shawn Warren said in the February results announcement: “Over the latest quarter, we continued to implement our focused growth strategy across the business. We are seeing robust top-line progress on the Love Child Organics business with broad retailer support and new distribution wins.
“The company’s ongoing cash and liquidity needs are being considered within the ongoing strategic review that was announced in June 2022; the board and management, working closely with advisors, continue to evaluate and progress strategic alternatives. However, there can be no assurances that the company will be successful in this regard.”
In its latest restructuring statement, GreenSpace Brands explained: “The stalking horse agreement establishes a minimum value in the SISP for the Love Child Organics business, which is comprised of all, or substantially all, of the assets of Love Child and certain assets of GreenSpace related thereto, and ensures the continued operation [of] the Love Child Organics business.
“Subject to court approval, the SISP will allow interested parties the opportunity to submit superior bids and participate in any auction process conducted pursuant to the terms of the SISP.”
The statement continued: “Unless the successful bid at the conclusion of the SISP provides for significantly higher value than the stalking horse agreement, there is not expected to be any recovery for holders of equity interests in the company.
“Certain members of the company’s senior management team have an interest in the entity to be formed by Pivot, which will be the purchaser under the stalking horse agreement if the stalking horse agreement is declared the successful bid under the SISP.”