Industry News Markets
GreenFirst Forest Products reports $2.25M loss in 2020

GreenFirst Forest Products Inc. has filed its audited consolidated financial statements for the year ended Dec. 31, 2020, and the related management discussion and analysis, both of which are available under GreenFirst’s profile on SEDAR at www.sedar.com. All amounts are in Canadian dollars unless indicated otherwise.

The company reported net loss attributable to common shareholders of $1.527 million, or $0.07 loss per share, and total comprehensive loss of $1.958 million in the fourth quarter of 2020, compared to net loss attributable to common shareholders of $0.209 million, or $0.01 loss per share, in the fourth quarter of 2020.

For the year ended Dec. 31, 2020, GreenFirst reported net loss attributable to common shareholders of $2.250 million, or $0.11 loss per share, and total comprehensive loss of $2.375 million, compared to net income attributable to common shareholders of $0.047 million, or $0.002 earnings per share, for the year ended December 31, 2019.

Significant events during 2020 included the following:

On Sept. 17, 2020, the company announced that 1347 Investors LLC, an investee company of GreenFirst, had agreed to acquire a sawmill and related assets located in Kenora, Ont., for consideration of $11,500,000 in cash from the court-appointed receiver of a resource-based vendor. The acquisition was approved by a court vesting order of the Manitoba Court of Queen’s Bench on Sept. 9, 2020. The acquisition closed on Oct. 6, 2020. The assets purchased in the acquisition are comprised of a sawmill and related equipment, and land of approximately 114 acres with approximately one km of shoreline, plus a four-acre island. The sawmill operations occupy approximately 42 acres of the land with the remaining land surplus to the mill operations. The sawmill is located near major transportation routes, including the Trans-Canada Highway and the main Canadian Pacific rail line, providing easy access to the nearby Canadian-United States border and several key mid-west U.S. markets, including Minneapolis, Chicago, St. Louis and Dallas.

Recent developments

On April 12, 2021, the company announced that it had entered into an asset purchase agreement pursuant to which a newly formed, wholly-owned subsidiary of the company (the “purchaser”) will acquire six lumber mills and one newsprint mill located in Ontario and Quebec, for a purchase price of US$140 million plus the value of the inventory on-hand at the time of closing of the transaction, reflecting an aggregate purchase price expected to be approximately US$214 million. The purchase price is payable approximately 85 per cent in cash and approximately 15 per cent in common shares in the capital of the company. In addition, a chip offset credit note will be issued by the purchaser to the vendor in the amount amount of C$7.9 million. The credit note is non-interest bearing and is payable in five equal annual installments on the anniversary of the closing. The purchaser may elect to set-off the principal amount of the credit note against amounts owing by the vendor to the purchaser or the company under a chip purchase agreement.

In connection with entering into of the purchase agreement, and to satisfy a portion of the purchase price, the company intends to conduct a rights offering for gross proceeds of at least US$75 million. The company intends to issue three rights or each of its outstanding common shares with each right being exercisable, at a subscription price of C$1.50 to acquire a subscription receipt. Each subscription receipt will, upon closing and without any further consideration, automatically be exchanged into a Common share. Senvest Management, LLC, has, pursuant to a binding backstop commitment, agreed to purchase, at the exercise price, all subscription receipts that are not otherwise subscribed for under the rights offering such that at least US$75 million of subscription receipts are issued.

Certain directors and officers of the company have agreed with Senvest that they will not exercise all or a portion of their rights and will transfer their rights to Senvest to the extent required to ensure that Senvest will hold a minimum of US$50 million in the company following completion of the rights offering. In consideration for providing the backstop commitment, Senvest will be granted warrants to acquire common shares equal to US$18,750,000 at an exercise price equal to the lower of C$3.18 and such other price as may be consented to by the TSX Venture Exchange and given customary nomination rights in respect of one independent director and customary registration rights for so long as Senvest holds at least 15 per cent of the issued and outstanding Common Shares. The backstop commitment is subject to customary terms and conditions, which will be detailed in a formal backstop commitment agreement. Insiders of the company and their families have likewise committed, either directly or indirectly, to exercising at least US$4 million of rights or other already outstanding convertible or exercisable securities of the company and have agreed not to sell or transfer their common shares for a period of six months following closing other than under customary exceptions.

If the rights are exercised in full, the gross proceeds to the company from the rights offering are expected to be approximately C$148 million.

The Purchaser has also entered into a commitment letter with a New York-based investment fund, on behalf of itself and certain of its affiliates and fund managed, sub-advised by its Lenders pursuant to which the lenders have committed to make available to the Purchaser a US$120 million senior secured term credit facility, conditional on the fulfilment of certain customary conditions (the “debt financing”). Completion of the debt financing is subject to certain conditions including, but not limited to, the completion of an equity financing, which is intended to be satisfied by the rights offering.

The Purchaser has also entered into a commitment letter with Royal Bank of Canada, pursuant to which it has committed to make available to the Purchaser a senior secured asset-based revolving credit facility, in an amount of $50 million (which may be increased upon syndication) subject to the terms therein. The asset-based revolving credit facility is not intended to be used to finance the payment of any of the purchase price due on closing.

Management comments:

Larry G. Swets, Jr., chief executive officer, stated, “We’re excited to begin this new chapter with GreenFirst as we pursue our plans to focus on lumber and forestry opportunities. We began this transformation with the purchase of the Kenora sawmill in 2020 and continued into 2021, entering into an asset purchase agreement with Rayonier A.M. Canada G.P. and Rayonier A.M. Canada Industries Inc. to acquire six sawmills and a newsprint mill in Ontario and Quebec, making us one of the largest companies in the North East focused in this space.”