CannTrust Holdings Inc. Seeking Court Approval of Proposal under Bankruptcy and Insolvency Act

VAUGHAN, ON, Nov. 17, 2022 /PRNewswire/ - Further to its press release dated October 18, 2022, CannTrust Holdings Inc. (the "Company" or "CTH") will be seeking court approval of the Division I Proposal made by the Company pursuant to the Bankruptcy and Insolvency Act (Canada) (the "Proposal"). The hearing is scheduled for 11:00 a.m. on November 28, 2022 or as soon after that time as the motion can be heard.

The original proposal dated October 18, 2022 was amended and restated on November 3, 2022 to (i) clarify the share distribution mechanics; (ii) clarify that CTH may transfer the proceeds of a potential HST refund to Phoena Holdings Inc. (if such refund is received), as opposed to transferring the right to claim the refund itself; and (iii) allow greater flexibility in respect of the timing of the dissolution of CTH with respect to resolution of tax planning matters.

The amended and restated Proposal was unanimously approved at the meeting of creditors held on November 4, 2022.

CTH is proposing to make further clarifying amendments to the Proposal In accordance with section 7.2 of the Proposal, which allows amendments after the meeting of creditors with the consent of the Proposal Trustee and approval of the Ontario Superior Court of Justice (the "Court"). Among other things, the amendments would add further details of the basis upon which CTH's shares in Phoena will be distributed to CannTrust Shareholders (as defined in the Proposal). The actual mechanics of the distribution of the Phoena Shares will be set out and governed by the Articles of Reorganization which are to form part of the court approval order sought on November 28, 2022.

CTH intends to distribute the shares it holds in Phoena to its existing shareholders, on the basis of one common share of Phoena for every one common share its shareholders hold of the Company. The following shareholders of the Company will not have a right to receive any Phoena Shares: (i) shareholders who own less than 10,000 common shares of CTH; (ii) persons whose common shares are held in any registered retirement savings plan, registered retirement income fund, registered pension plan, deferred profit sharing plan, tax-free savings account, home buyer's plan, lifelong learning plan, registered education savings plan, registered disability savings plan, pooled retirement savings plan, or any other form of registered savings vehicle for which the Phoena Shares do not qualify as a permitted investment or a "qualified investment" within the meaning of the Income Tax Act (Canada), as applicable; and (iii) persons who are not (A) Canadian residents, (B) U.S. Persons, provided that the Company receives an opinion from qualified and independent U.S. securities counsel in form and substance satisfactory to the directors of the Company that the distribution to U.S. Persons will be exempt from the registration requirements under the United States Securities and Exchange Act of 1933; or (C) persons other than those described in (A) and (B) in any jurisdiction in respect of which an opinion has been obtained from qualified and independent securities counsel, in form and substance satisfactory to the directors of the Company, confirming that the distribution will be exempt from any requirement to prepare, file or deliver any registration statement, prospectus, financial statement, offering memorandum or similar disclosure document in connection with the distribution.

The Company is limiting the distribution of its Phoena Holdings shares to holders or owners of at least 10,000 CTH common shares so that the costs of distribution will not significantly exceed the value of the Phoena shares being distributed. When Phoena completed its private placement with Marshall Fields Holdings and other strategic investors in March 2022, they were issued common shares at a price of approximate $0.009 per share, implying that 10,000 shares had a value of $90.

Any person wishing to support or oppose the relief sought at the approval hearing may serve court materials on the service list setting out their basis for their support or opposition and/or attend the hearing and should contact the Proposal Trustee for further information.

After considering the court materials filed by the Proposal Trustee, CTH and any other person, and hearing the submissions of those present at the hearing, the Court may approve the Proposal and other relief sought by CTH. If approved by the Court, CTH would then proceed to implement the Proposal.

To obtain further details about the time and place of the hearing and/or to review the CTH's or the Proposal Trustee's motion materials, please visit the Proposal Trustee's website at http://www.ey.com/ca/canntrust. The Proposal Trustee will post additional relevant information and documentation related to these proceedings on its website as they become available.    

CTH's primary asset is an approximate 10% equity interest in Phoena. Although CTH is a reporting issuer under the laws of each of the Canadian provinces except for Quebec, it remains subject to the CTO and its common shares have been delisted by the Toronto Stock Exchange and the New York Stock Exchange.

Phoena is an award-winning, federally regulated licensed cannabis producer, with locations in Vaughan and Fenwick, Ontario. Phoena operates a portfolio of brands, including estora, Liiv, SYNR.G and Xscape.

Phoena is committed to providing exceptional consumer experience, quality & consistent products. Phoena's greenhouse produces Grade A cannabis flower, which is sold in a variety of dried flower and extract formats.

Phoena creates cannabis products that meet the diverse needs of patients and consumers, promoting positivity, supporting creativity, and inspiring confidence.

Phoena, empowering you every day.

Learn more at Phoena.com

This press release contains "forward-looking information" within the meaning of Canadian securities laws and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United States safe harbor laws, and such statements are based upon CannTrust's current internal expectations, estimates, projections, assumptions and beliefs and views of future events.

Forward-looking information and forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expect", "likely", "may", "will", "should", "intend", "anticipate", "potential", "proposed", "estimate" and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions "may", "would" or "will" happen, or by discussions of strategy.

The forward-looking information and statements in this news release include statements relating to CTH's efforts to implement a Proposal under the BIA. Forward-looking information and statements necessarily involve known and unknown risks, including, without limitation: the risk that, if Phoena requires additional equity, the Company's investment in Phoena could be diluted further; the risk that Phoena or its affiliates could default under its credit facilities from Cortland Credit Lending Corporation or Marshall Fields International B.V., which are secured against substantially all of Phoena and the Company's assets; the risk that the Company will not be able to obtain an order from the Court approving the Proposal or complete the contemplated restructuring; the impact of any regulatory and other investigations or proceedings; the risks associated with general economic conditions and/or adverse industry events; the risk of loss of markets; the risk of future legislative and regulatory developments in Canada, the United States and elsewhere; the state of the cannabis industry in Canada generally; the ability of Phoena to attract and retain suitable directors, officers and employees; the risks that Phoena will not be able to satisfy the requirements of a stock exchange to obtain a listing or complete a strategic transaction; and the ability of Phoena to successfully implement its business strategies.

Any forward-looking information and statements speak only as of the date on which they are made, and, except as required by law, neither the Company nor Phoena undertake any obligation to update or revise any forward-looking information or statements, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company or Phoena to predict all such factors. When considering these forward-looking information and statements, readers should keep in mind the risk factors and other cautionary statements in the Company's Annual Information Form dated March 28, 2019 (the "AIF") and filed with the applicable Canadian securities regulatory authorities on SEDAR at www.sedar.com and filed as an exhibit the Company's Form 40-F annual report under the United States Securities Exchange Act of 1934, as amended, with the United States Securities and Exchange Commission on EDGAR at www.sec.gov (the "March 2019 Form 40-F"). The risk factors and other factors noted in the AIF could cause actual events or results to differ materially from those described in any forward-looking information or statements. Readers are also reminded that the Company remains in default of its periodic disclosure requirements under applicable securities laws and stock exchange requirements, that its most recent AIF, Form 40-F and other disclosures do not reflect all risk factors that currently face the Company, and that the Company has not completed or filed the restatements of the financial statements included in the AIF or the March 2019 Form 40-F or otherwise filed an amendment to such Form 40-F, and that the Company was permitted by the Initial Order of the Superior Court of Justice to not to correct its prior filings or make any further filings in respect of periodic disclosure requirements under applicable securities laws and stock exchange requirements. None of the Company's securities is listed for trading on any stock exchange in any jurisdiction and, in Canada, trading in the Company's securities is subject to a cease-trade order issued on April 13, 2020 by the Ontario Securities Commission for CannTrust's failure to comply with its disclosure obligations under applicable securities laws.

SOURCE CannTrust Holdings Inc.