Acasta Enterprises Inc. says it has decided to “unwind” a debt-to-equity deal that was objected to by two shareholders of the once high-profile special purpose acquisition company.
In February, Toronto-based Acasta said it converted into shares nearly $4.8 million in high-yield debt that was held by an entity controlled by the company’s co-CEOs, Charles Wachsberg and Richard Wachsberg.
According to Acasta, the debt-to-equity deal would have saved the company “a significant amount of interest payments during 2019,” but likely not enough to offset the expected costs of a legal action over the issue.
“In addition, during this critical phase in the Company’s operational turnaround, it was determined that further management distraction over what was anticipated to have been a straightforward cost-saving matter would not be beneficial to the Company or its shareholders,” a release stated earlier this week.
Acasta said it had “determined to unwind” the conversion, and expected to reverse it effective Friday.
The decision came after a pair of Acasta shareholders, Anson Advisors Inc. and Ewing Morris & Co. Investment Partners Ltd., pushed back against the conversion attempt by applying to the Ontario Securities Commission to reverse the Toronto Stock Exchange’s approval of the deal. Hearings on the matter had been scheduled for the end of May.
Acasta and Anson also traded press releases and accusations over the transaction, with the latter claiming the deal was not in the best interests of the company. Anson has said it either owns or controls around 18.7 per cent of Acasta’s shares.
The conversion attempt also followed a dispute over strategy and the change in management at Acasta that came this past December, putting the Wachsbergs and a new board in charge.
Anson had said in February, among other things, that it shared “serious concerns with other shareholders about the governance of Acasta and the direction” that had been taken since the boardroom shakeup.
Those changes came after a fall from grace for Acasta, which launched in 2015 as a SPAC. The company had harboured visions of becoming a leading private-equity firm and bought Apollo along with two other businesses. The latter two were sold last year.
Since its initial public offering, Acasta shares have lost more than 90 per cent of their value and the company has struggled under its debt load.
In March, Acasta reported that it had taken a total loss for 2018 of $319.6 million, down from $440.9 million the year before. It also said it had cut its debt to $74.4 million from $983.9 million.
“The Company is focused on streamlining operations to reduce its cost structure and overall Company debt with a view towards enhancing shareholder value over the medium to long term,” Acasta’s press release said. “The Company will continue to explore various alternatives to achieve these ends.”