Cannabis producer Hexo Corp. (HEXO) is laying off 180 staff in an effort to cut costs and avoid defaulting on one of its loans.
The Gatineau, Quebec-based company said the staff cuts, half of which come from closing its production facility in Nova Scotia, will help it save $15 million a year.
The layoffs are part of Hexo's ongoing turnaround efforts, which were first undertaken in December. The plan is expected to generate approximately $37.5 million this fiscal year in new cash flow and about $135 million in its next fiscal year.
The cost savings are aimed at pushing Hexo to report positive earnings as quickly as possible to avoid breaking a covenant on a debt financing deal announced in May 2021. The deal raised $360 million U.S. in senior secured convertible notes from New Jersey-based hedge fund High Trail Capital LP that was used to acquire Redecan Pharm last year.
Hexo, whose stock is currently trading at $0.70 U.S., is also in danger of being delisted from the Nasdaq exchange if it cannot maintain its share price above $1 U.S. Hexo’s share price has declined 82% in the last six months.
Last week, a major Hexo shareholder announced plans to nominate five independent directors to the company's board at a March shareholders’ meeting.
