GREENBROOK TMS RAISES US$2.5 MILLION IN DEBT FINANCING

Rhea-AI Summary

Greenbrook TMS Inc. announces a new senior secured term loan of US$2,538,071 from Madryn Asset Management, LP under the Credit Facility. The company now has approximately US$87 million outstanding under the facility, with plans to use the new funds for general corporate and working capital purposes. The Amendment also extends the minimum liquidity covenant period to March 15, 2024.

Financial Analyst

The additional US$2,538,071 in senior secured term loans acquired by Greenbrook TMS Inc. from Madryn Asset Management represents a strategic financial maneuver aimed at bolstering the company's working capital and general corporate purposes. The increase in the loan amount to an aggregate of approximately US$87 million underscores a significant leveraging of the company's balance sheet, which could have both positive and negative implications for its financial stability and operational flexibility.

From a financial perspective, the infusion of capital may provide Greenbrook with the necessary resources to sustain operations, invest in growth initiatives, or navigate short-term liquidity challenges. However, the extension of the minimum liquidity covenant suggests that the company is operating with a narrow financial cushion, which could be a red flag for potential liquidity risks. Stakeholders should monitor the company's subsequent financial statements for indications of improved cash flow management and revenue generation, as these factors will be critical in assessing the long-term sustainability of the current debt level.

Legal Expert

The Amendment's characterization as a 'related party transaction' under Multilateral Instrument 61-101 necessitates a closer examination of the terms and conditions to ensure the protection of minority shareholders. The unanimous approval by the independent members of the board of directors and the exemption from the minority approval requirements suggest that the transaction has been deemed fair and reasonable from a legal standpoint. However, it is important for investors to understand that such transactions can introduce potential conflicts of interest and the company's governance practices will be critical in maintaining transparency and shareholder trust.

The fact that the New Loan is not convertible into securities is a significant detail, as it limits the potential for dilution of existing shareholders' equity. Nevertheless, the reduction of the minimum liquidity covenant to US$300,000 until March 15, 2024, could be a point of concern, indicating a potential tightness in liquidity that might affect the company's ability to meet its financial obligations in the near term.

Market Research Analyst

The provision of additional financing through amendments to existing credit facilities is a common practice in the industry, especially for companies seeking to navigate uncertain market conditions or fund strategic initiatives. The impact of such financial decisions on the stock market often hinges on investor perception of the company's growth prospects and risk profile. In the case of Greenbrook, the market may react to the news by weighing the potential benefits of increased liquidity against the risks associated with higher debt levels.

Investors will likely scrutinize the company's future earnings reports and liquidity ratios to determine the effectiveness of the new capital in driving growth or improving operational efficiency. Additionally, the market will observe whether Greenbrook explores further financing options, as mentioned in the announcement, which could signal ongoing capital needs or a more aggressive growth strategy. The company's ability to secure financing on favorable terms may be interpreted as a sign of confidence by lenders in its business model and future prospects.

TORONTO, Feb. 15, 2024 /PRNewswire/ - Greenbrook TMS Inc. (NASDAQ: GBNH) ("Greenbrook" or the "Company") today announced that it has entered into the twenty-fifth amendment (the "Amendment") to the Company's credit facility (the "Credit Facility") with affiliates of Madryn Asset Management, LP ("Madryn"). As part of the Amendment, the Company secured an additional US$2,538,071 in senior secured term loans from Madryn under the Credit Facility (the "New Loan"). After giving effect to the New Loan, the Company has an aggregate amount of approximately US$87 million outstanding under the Credit Facility.

The proceeds of the New Loan are expected to be used by the Company for general corporate and working capital purposes. The Company is also currently considering additional near-term financing options to address its future liquidity needs.

The Amendment also extends the period during which the Company's minimum liquidity covenant is reduced from US$3,000,000 to US$300,000 to March 15, 2024.

MI 61-101 Disclosure

Madryn is an insider of the Company. Accordingly, the foregoing transactions are considered "related party transactions" for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The foregoing transactions were reviewed and unanimously approved by the independent members of the board of directors of the Company. The New Loan, which is not convertible into securities of Greenbrook, is exempt from the minority approval requirements under section 5.7(1)(f) of MI 61-101 because the New Loan is on reasonable commercial terms that are not less advantageous to the Company than alternative financings that may have been available at the time that terms were agreed with Madryn. Furthermore, a formal valuation is not required under MI 61-101 as the foregoing transactions are not the type of related party transaction that requires a formal valuation.

About Greenbrook TMS Inc. 

Operating through 130 Company-operated treatment centers, Greenbrook is a leading provider of Transcranial Magnetic Stimulation ("TMS") therapy and Spravato® (esketamine nasal spray), FDA-cleared, non-invasive therapies for the treatment of Major Depressive Disorder ("MDD") and other mental health disorders, in the United States. TMS therapy provides local electromagnetic stimulation to specific brain regions known to be directly associated with mood regulation. Spravato® is offered to treat adults with treatment-resistant depression and depressive symptoms in adults with MDD with suicidal thoughts or actions. Greenbrook has provided more than 1.3 million treatments to over 40,000 patients struggling with depression.

Cautionary Note Regarding Forward-Looking Information

Certain statements contained in this press release, including statements relating to the New Loan and the expected use of proceeds therefrom, may constitute "forward-looking information" within the meaning of applicable securities laws in Canada and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking information"). Forward-looking information may relate to the Company's future financial and liquidity outlook and anticipated events or results and may include information regarding the Company's business, financial position, results of operations, business strategy, growth plans and strategies, technological development and implementation, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding the New Loan and the expected use of proceeds therefrom may be forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "does not anticipate", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "should", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not facts but instead represent management's expectations, estimates and projections regarding future events or circumstances.

Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: macroeconomic factors such as inflation and recessionary conditions, substantial doubt regarding the Company's ability to continue as a going concern due to recurring losses from operations; inability to increase cash flow and/or raise sufficient capital to support the Company's operating activities and fund its cash obligations, repay indebtedness and satisfy the Company's working capital needs and debt obligations; prolonged decline in the price of the Company's common shares (the "Common Shares") reducing the Company's ability to raise capital; inability to satisfy debt covenants under the Credit Facility and the potential acceleration of indebtedness; risks related to the resolution of the Company's ongoing litigation with Benjamin Klein and compliance with the terms of their settlement agreement; risks related to the ability to continue to negotiate amendments to the Credit Facility to prevent a default; risks relating to the Company's ability to deliver and execute on the previously-announced restructuring plan (the "Restructuring Plan") and the possible failure to complete the Restructuring Plan on terms acceptable to the Company or its suppliers (including Neuronetics, Inc.), or at all; risks relating to maintaining an active, liquid and orderly trading market for Common Shares as a result of the Company's recent delisting notification and potential inability to regain compliance with the Nasdaq Stock Market's listing rules; risks relating to the Company's ability to realize expected cost-savings and other anticipated benefits from the Restructuring Plan; risks related to the Company's negative cash flows, liquidity and its ability to secure additional financing; increases in indebtedness levels causing a reduction in financial flexibility; inability to achieve or sustain profitability in the future; inability to secure additional financing to fund losses from operations and satisfy the Company's debt obligations; risks relating to strategic alternatives, including restructuring or refinancing of the Company's debt, seeking additional debt or equity capital, reducing or delaying the Company's business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining bankruptcy protection, and the terms, value and timing of any transaction resulting from that process; claims made by or against the Company, which may be resolved unfavorably to us; risks relating to the Company's dependence on Neuronetics, Inc. as its exclusive supplier of TMS devices. Additional risks and uncertainties are discussed in the Company's materials filed with the Canadian securities regulatory authorities and the United States Securities and Exchange Commission from time to time, available at www.sedarplus.ca and www.sec.gov, respectively. These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

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SOURCE Greenbrook TMS Inc.

What is the total amount of the new senior secured term loan secured by Greenbrook TMS Inc. from Madryn Asset Management, LP?

Greenbrook TMS Inc. secured a new senior secured term loan of US$2,538,071 from Madryn Asset Management, LP.

How much outstanding amount does Greenbrook TMS Inc. have under the Credit Facility after the new loan?

Greenbrook TMS Inc. has approximately US$87 million outstanding under the Credit Facility after securing the new loan.

What are the intended uses of the proceeds from the new loan by Greenbrook TMS Inc.?

The proceeds of the new loan are expected to be used by Greenbrook TMS Inc. for general corporate and working capital purposes.

When is the period during which the minimum liquidity covenant of Greenbrook TMS Inc. reduced to US$300,000 extended to?

The period during which the minimum liquidity covenant of Greenbrook TMS Inc. is reduced to US$300,000 is extended to March 15, 2024.

Is the new loan convertible into securities of Greenbrook TMS Inc.?

The new loan from Madryn Asset Management, LP is not convertible into securities of Greenbrook TMS Inc.