Balance Sheet & Liquidity
Aurora has also announced a number of amendments to its secured credit facilities which are designed to better align the Company's balance sheet and cash flow expectations with current market conditions and to provide financial flexibility over the near term. These amendments include:
- Complete removal of all EBITDA ratio covenants, originally set to commence in the period ending September 30, 2020
- Complete removal of fixed charge coverage ratio covenant
- Adjustment of the total funded debt-to-equity covenant to 0.20:1 commencing in fiscal third quarter 2020, from 0.25:1 currently
- Reduction of the total facility size available by $141.5 million
- Introduction of a new minimum liquidity covenant of $35 million
- The introduction of a covenant requiring Aurora to achieve positive EBITDA thresholds beginning in fiscal Q1 2021 that The Company believes are consistent with today's announced changes
Glen Ibbott, Aurora's CFO stated, "We are pleased to have reached an agreement with our syndicate of banks to provide Aurora with additional financial flexibility aligned with our focus on achieving near-term profitability and providing the Company with options to refinance the facility at maturity. I would like to thank our banking partners for their continued support of Aurora."
Aurora announced that, given market current cannabis market conditions and the slower than expected near-term industry growth, it has undertaken a thorough review of all business operations and concluded that certain assets and goodwill values as at December 31, 2019 exceed current fair-market valuations. As such, when Aurora formally reports its fiscal second quarter 2020 results, it expects to report asset impairment charges on certain intangible and property, plant and equipment in a range of $190 million to $225 million and write-downs of goodwill in the range of $740 million to $775 million. Following these non-cash charges, Aurora expects to remain compliant with its revised total debt-to-equity covenant going forward.
Glen Ibbott continued, "The assets being impaired are predominantly associated with our operations in South America and Denmark, as our estimate of the timeline for substantial growth extends in those markets. Our core Canadian cannabis assets are not impacted by these non-cash asset impairment charges." Ibbott concluded, "We believe that the long-term opportunity for Aurora remains very compelling, despite a slower than anticipated rate of industry growth in the near-term. We also believe our approach to rationalizing the business and conservatively improving our balance sheet positions Aurora in a more stable position for sustainable growth going forward."
Aurora announced that its consolidated cash position was $156 million, excluding $45 million of restricted cash as at December 31, 2019. This includes gross proceeds raised under its US$400 million At-the-Market ("ATM") financing program of approximately US$245 million (or approximately $325 million) to date in fiscal 2020. As of today, the Company has remaining capacity under its current ATM program of approximately $200 million. With the cost reduction and business transformation initiatives announced today, the Company expects that utilization of the ATM capacity will be sufficient to fund operations and remaining required capital expenditures, to the points where positive EBITDA and free cash flow are achieved.