The Very Good Food Company, the financially embattled alternative-protein business, is on the verge of securing funding.
After sounding yet another warning in November over the need to raise cash to ensure the future “viability” of the Canadian entity, the Very Good Butchers brand owner has entered a non-binding agreement with private-equity firm Reef Capital for CAD2m (US$1.4m).
Vancouver-based The Very Good Food Company said the “non-brokered private placement of an unsecured convertible note” will have a maturity value of CAD2.1m. The securities, which carry an annual interest rate of 15%, will come due 18 months after the completion of the issuance.
The Very Good Food Company will use the proceeds for working capital, assuming the debt transaction closes on the target date of 30 December.
In November, the company said it had been managing its short-term liquidity through limited access to a revolving line of credit under a senior secured credit facility with Waygar Capital. The Very Good Food Company noted then it could rely on that credit until the end of December, by which time it could not “ensure the financial viability of its business”.
Reef Capital will have the option to convert the notes into shares of The Very Good Food Company at a price of ten Canadian cents each.
It has been a chequered year for The Very Good Food Company following the departure of its founders amid a cash-burn warning, the appointment of a new executive management team and the disposal of assets to keep the business afloat. A strategic review was launched in September, a process that is still ongoing and could entail an acquisition or merger, the company has said.
The Very Good Food Company’s share prices have been on a downhill spiral over the past year on both the Nasdaq and Canada’s Venture Exchange, with the latter yet to approve the issuance of the convertible notes.
In November, the business, which also owns the Very Good Cheese Co. alternative brand, said it planned to appeal a delisting notice from the US Nasdaq exchange after again violating listing rules pertaining to the share price.
Reef Capital, meanwhile, will have two nominees appointed to The Very Good Food Company’s board. In turn, one of the company’s directors will resign from the board and Reef will have rights for nominations at future shareholder meetings.
