Humble & Fume Seeks Restructuring Refuge Under Creditor Protection

Humble & Fume Seeks Restructuring Refuge Under Creditor Protection

Cannabis and accessories distributor Humble & Fume Inc. (CSE: HMBL) (OTCQX: HUMBF), along with its subsidiaries, received protection to rearrange its business under Canadian bankruptcy proceedings, according to documents filed in court.

The group, which includes Humble & Fume Inc. (Manitoba), B.O.B. Headquarters Inc., and other entities, is seeking a range of legal reliefs under the Companies’ Creditors Arrangement Act due to recent financial trouble.

“After extensive consultation … and thorough consideration of all available alternatives, the directors of the Humble Group determined that it was in the best interests of the Humble Group to seek creditor protection under the CCAA,” the company said in a statement.

During a Friday court hearing, the company was granted a stay of proceedings until Jan. 15. The interim measure is part of the CCAA process, allowing the company time to restructure its finances.

The group’s restructuring plan involves a court-supervised sales process under the CCAA, with a sale and solicitation process (SISP) backed by a preliminary purchase agreement as part of the strategy.

Deloitte Restructuring Inc. was tapped as the court-appointed monitor and will be responsible for overseeing the process after having already assisted in preparing a cash flow forecast and guiding the CCAA proceedings.

The move follows discussions with legal and financial advisors in the wake of sustained financial hemorrhaging, with a net loss of about $24.9 million in the year that ended June 30, 2023. The loss was attributed to intense competition and an oversaturated cannabis market, compounded by rising interest rates and regulatory costs linked to their public trading status.

In its initial application, the group requested the stay of proceedings and an administration charge of $150,000 over its assets to secure payment for professional fees and expenses during the restructuring. Additionally, they requested the court’s approval to continue using its existing cash management system during the proceedings.

“The Applicants are insolvent, face a severe liquidity crisis, and are in urgent need of relief under the CCAA,” the judge wrote in filings endorsing the application. “Given its liquidity crisis, the Applicants require the breathing room afforded by the CCAA in order to stabilize their operations and prepare a sales and investment solicitation process.”

A subsequent court hearing is scheduled for Jan. 12, where the company will seek final approval for the SISP, which would help the firm emerge from the CCAA proceedings on a going concern basis.

“A stay of proceedings is appropriate where it provides a debtor with breathing room while the debtor seeks to restore solvency,” the judge added.

Humble & Fume stated that it currently has enough funds to navigate the CCAA proceedings and does not anticipate the need for additional financing.

The CCAA is a federal law in Canada that allows financially troubled corporations that owe more than at least $5 million to their creditors the opportunity to restructure their affairs.

74328290_1_Initial Order of Justice Cavanagh dated January 5, 2024

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