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BZAM goes into creditor protection, Final Bell vows to fight

Published on February 29, 2024 by David Wylie

Photo: Contributed

BZAM has gone into creditor protection, setting up a legal battle against another company it had just acquired.

Initially backed by a Kuwaiti billionaire, BZAM it says it’s fallen on hard times and can’t make ends meet.

However, the announcement comes less than 60 days following BZAM’s acquisition of Final Bell, which accuses the Vancouver-based company of evading creditors, defrauding shareholders, and trying to facilitate a discounted sale to a connected party.

The Ontario Superior Court of Justice granted the creditor protection order this week, which allows BZAM to restructure its business and financial affairs.

“Due to, among other things, margin pressures caused by significant competition and the fragmentation of the cannabis industry, and financial underperformance and pressures resulting from obligations owing to creditors, the BZAM Group has been unable to generate positive cash flows and has incurred cumulative losses,” says BZAM in a statement.

The initial creditor protection order provides for a stay of proceedings in favour of BZAM and the approval of debtor-in-possession financing. BZAM says it now intends to seek court approval to launch a sale and investment solicitation process for its business and assets in early March. BZAM adds it expects to enter into a transaction with “an entity related to an existing creditor and significant stakeholder of the company” to acquire substantially all of the business and assets of the BZAM Group—in other words, a “stalking horse” bid.

The proposed bid is expected to be disclosed soon.

BZAM says it will continue to do business during the proceedings.

Final Bell, meanwhile, announced it intends to challenge BZAM’s application under the Companies’ Creditors Arrangement Act (CCAA).

BZAM’s acquisition of Final Bell, which closed on Jan. 5, resulted in the company becoming BZAM’s second largest shareholder, its largest unsecured lender, and a key supplier of hardware and packaging on an ongoing basis.

“The acquisition involved extensive due diligence by [Final Bell] based on material provided by BZAM and its management, together with BZAM’s public filings, and the company relied on representations and warranties made by BZAM and its management to support the value of the consideration received by the company and BZAM’s ability to service its debt obligations to the company,” says a statement by Final Bell.

Final Bell says it believes that BZAM’s initiation of CCAA proceedings constitutes “an improper use of creditor protection legislation to evade its creditors, defraud shareholders, and facilitate a related party going private transaction at an unjustified discounted value in order to circumvent a customary going private transaction requiring shareholder and creditor approval.”

“The end result would not only prejudice BZAM’s public shareholders and stakeholders, but also constitutes an attempt by BZAM to evade its agreements and commitments relating to its acquisition of FB Canada in order to acquire it for no valuable consideration. Contrary to BZAM’s assertions in its announcement today, the company rejects BZAM’s claim that its board of directors carefully considered any available alternatives prior to proceeding with the CCAA Proceedings,” says Final Bell.

Final Bell says it intends to use all legal recourse available to it to oppose the CCAA Proceedings and hold BZAM and its management accountable for their actions.

BZAM merged last year with The Green Organic Dutchmen and appeared on the Canadian Stock Exchange as BZAM. Prior to that, the company had been partnering with BC craft companies, including Dunn Cannabis and Fresh.