TORONTO, July 10, 2025 (GLOBE NEWSWIRE) -- Enthusiast Gaming Holdings Inc. (TSX: EGLX) ("Enthusiast Gaming" or the "Company") today announces a debt financing and forbearance transaction (the "Transaction") designed to support the Company's recapitalization and long-term business objectives. Following the Company's announcement of the strategic divestment of its direct sales business line, Enthusiast Gaming has sharpened its focus on its portfolio of high-performing digital gaming media assets that deliver stable, high-margin revenue. These assets serve as the foundation for the Company's streamlined operating model and long-term growth potential.
In light of the strength of its core portfolio, and in response to multiple unsolicited offers and expressions of interests, the Company's board of directors (the "Board") has also initiated a strategic review process (the "Strategic Review") to explore opportunities to further strengthen its balance sheet and unlock shareholder value.
Special Committee and Strategic Transaction
In connection with the Strategic Review, which may include recapitalization and refinancing transactions designed to strengthen the Company's balance sheet and deleverage the business (a "Strategic Transaction"), the Board has formed a Special Committee (the "Special Committee") composed of John Albright (Chair), Jordan Gnat and Thomas Hearne. The Special Committee is responsible for overseeing the review process, evaluating potential alternatives, and making recommendations to the Board.
The Special Committee has engaged Oakvale Capital Partners LLP ("Oakvale") as its financial advisor in respect of the Strategic Review. Management and the Special Committee will continue to work with Oakvale over the coming months to review the various alternatives available to the Company and to respond to ongoing inbound inquiries, with the intention of entering into a definitive agreement in respect of a Strategic Transaction by the end of 2025. The process is being undertaken with the full support of the Company's management, Board, and lenders.
Debt Financing and Forbearance Agreements
The Transaction will result in the provision of a non-revolving term loan to the Company in the principal amount of $2,000,000 (the "Term Loan"), subject to satisfaction of customary conditions precedent, pursuant to the terms of a forbearance and first supplemental credit agreement among the Company, as borrower, certain subsidiaries of the Company, as guarantors, Beedie Investments Ltd. ("Beedie Capital"), as administrative and collateral agent (the "Agent"), and lenders (the "Lenders") led by Beedie Capital (the "Beedie Forbearance Agreement") entered into on July 9, 2025. The Beedie Forbearance Agreement amends and supplements the credit agreement dated as of July 12, 2024, in respect of the Company's non-revolving debt facility of $20,000,000 (the "Credit Agreement") and includes a forbearance by the Agent and the Lenders whereby the Agent and the Lenders will agree to forbear from demanding and accelerating repayment of indebtedness outstanding under the Credit Agreement and to forbear from enforcing their security thereunder. Net proceeds of the Term Loan will be used for working capital purposes. Pursuant to the Transaction and as a condition to the advance of the Term Loan, the Company also announces a private placement of common share purchase warrants of the Company (the "Private Placement") to the Lenders.
As a condition of the Transaction, and in response to certain defaults of the Company under the Company's amended and restated commitment letter dated as of October 6, 2023, with its senior lender (the "Senior Commitment Letter"), the Company, as borrower, certain subsidiaries of the Company, as guarantors, and the senior lender to the Company (the "Senior Lender") have also entered into a separate forbearance agreement dated July 9, 2025 (the "Senior Forbearance Agreement" and together with the Beedie Forbearance Agreement, the "Forbearance Agreements"), whereby the Senior Lender will agree to forbear from demanding and accelerating repayment of indebtedness outstanding under the Senior Commitment Letter and to forbear from enforcing its security thereunder, as a result of defaults by the Company thereunder.
The forbearance period under the Senior Commitment Letter and the Credit Agreement will be until the earliest of (a) December 31, 2025 (in the case of the Senior Commitment Letter) and March 31, 2026 (in the case of Credit Agreement), (b) the completion date of a Strategic Transaction, and (c) the expiry or termination of the forbearance period agreed to by the Lenders (in the case of the Senior Commitment Letter) or the Senior Lenders (in the case of the Credit Agreement), as applicable, or any further default. Pursuant to the Forbearance Agreements, the Company has also agreed to implement, by no later than July 31, 2025, a cost-cutting plan to achieve a minimum of $3,000,000 in annualized cost savings, which is expected to be fulfilled by the Company's previously announced divestment of its direct sales business line.
Terms of the Term Loan and Warrant Issuance
The Term Loan bears interest at a fixed rate of 16.0% per annum calculated and payable monthly in arrears, with: (i) interest at 8% per annum to accrue and be added to the outstanding principal amount of Term Loan for that month ("PIK Interest"), and (ii) interest at 8% per annum payable in cash each month. The rate of interest on the existing loan pursuant to the Credit Agreement will be amended to correspond to the rate of interest under the Term Loan, but reducing to 14% (all paid in cash) from April 1, 2026. In addition, each Lender shall be entitled, upon notice to the Company, but subject to obtaining, if applicable, stock exchange and/or shareholder approval, to elect to convert all or any portion of their respective pro-rata share of the PIK Interest into common shares in the capital of the Company ("Common Shares") at a price equal to the Market Price (as defined in TSX policy) of the Common Shares immediately prior to conversion on the Toronto Stock Exchange ("TSX"). Enthusiast Gaming will pay the Lenders a commitment fee in the amount of $40,000, as well as an exit fee in the amount of $75,000 (which exit fee will be reduced to $50,000 if all outstanding obligations are repaid on or before December 31, 2025). Subject to the terms of the Beedie Forbearance Agreement and the Credit Agreement, the Term Loan will be due and payable by July 12, 2028 and may be prepaid without penalty or fees at any time prior to March 31, 2026, or prepaid after March 31, 2026 subject to certain conditions including the payment of applicable prepayment fees.
The Term Loan will be guaranteed by certain subsidiaries of the Company and secured by a second-ranking security interest over substantially all of the assets of the Company and the guarantor subsidiaries.
As a result of the defaults under the Senior Commitment Letter and the Credit Agreement, the Company is also required to pay default interest on amounts outstanding at a rate of 2.0% under the Senior Commitment Letter and 5.0% under the Credit Agreement.
In connection with the Transaction, Enthusiast Gaming proposes to issue 6,005,178 warrants to the Lenders in the aggregate (the "Participation Warrants"); and to amend the exercise price for the 36,574,074 warrants originally issued to Beedie Capital on July 12, 2024 (such warrants being the "Existing Warrants", and collectively with the Participation Warrants, the "Warrants") to match the exercise price of the Participation Warrants to be issued to the Lenders in connection with the Term Loan. The exercise price of the Warrants will be equal to $0.083, being a 15% premium over the five consecutive trading day volume weighted average price of the Common Shares measured as of July 9, 2025. Each Participation Warrant is exercisable to purchase one Common Share and will expire 5 years from the effective date of the Beedie Forbearance Agreement. The current exercise price of the Existing Warrants is $0.135 per Common Share (subject to adjustment in accordance with the warrant certificate of the Existing Warrants). Aside from the change in exercise price and to the "blocker provisions" contained in the Existing Warrants, all other terms of the Existing Warrants will continue unchanged, including the expiry date. No insiders of the company hold the Existing Warrants.
TSX Approvals
Completion of the Private Placement is subject to and conditional upon receipt of all necessary approvals of the TSX. As a result of the Company's application to the TSX to amend the Existing Warrants, pursuant to Section 608 of the TSX Company Manual, the amendments to the Existing Warrants will not be effective until at least the date that is 10 business days from the date hereof.
Advisors
Norton Rose Fulbright Canada LLP acted as legal counsel to Enthusiast Gaming in respect of the Transaction. Dentons Canada LLP acted as legal counsel to Beedie Capital.
About Enthusiast Gaming
Enthusiast Gaming Holdings Inc. (TSX: EGLX) builds tools, platforms, and experiences that gamers use every day. Its portfolio of owned and operated digital properties includes some of the most recognizable names in gaming, such as U.GG, Icy-Veins, TheSimsResource, PocketGamer, Addicting Games, and Fantasy Football Scout, as well as the global B2B event series PocketGamer Connects. Through these assets, Enthusiast Gaming generates revenue from programmatic advertising, subscriptions, and events, and is focused on expanding its owned IP and deepening direct engagement with its audience.
About Beedie Capital
Beedie Capital is a multi-strategy direct investment platform that manages the alternative investments for Beedie, one of the largest private companies in Western Canada. It deploys capital using a flexible, evergreen mandate, and applies a highly agnostic approach to the duration, structure and size of its investments. Beedie Capital combines the strategic capabilities of an institutional investment platform with the flexibility and entrepreneurial mindset of a privately owned business.
Beedie Capital invests in any sector, with a core focus on Technology, Tech-enabled Services, and Metals and Mining, and seeks to grow its invested capital alongside the enterprise value of its investments. For further information on Beedie Capital, please visit www.beediecapital.com.
Contacts
Enthusiast Gaming: Alex Macdonald, Chief Executive Officer
Investors: investor@enthusiastgaming.com
Media: press@enthusiastgaming.com
Forward Looking Statements
This news release contains certain statements that may constitute forward-looking information under applicable securities laws. All statements, other than those of historical fact, which address activities, events, outcomes, results, developments, performance or achievements that Enthusiast Gaming anticipates or expects may or will occur in the future (in whole or in part) should be considered forward-looking information. Often, but not always, forward-looking information can be identified by the use of words such as "proposes", "expects", "anticipates", "subject to", "designed to", "establish", "implement" or "believes" or variations (including negative variations) of such words and phrases, or statements formed in the future tense or indicating that certain actions, events or results "may", "could", "would", "might" or "will" (or other variations of the forgoing) be taken, occur, be achieved, or come to pass. Forward-looking statements in this news release include, but are not limited to statements regarding the use of proceeds of the Term Loan, anticipated benefits of the Transaction, compliance with the terms of the Forbearance Agreements, the potential of consummating a Strategic Transaction, the issuance of Warrants to the Lenders, the ability to implement a sufficient cost-cutting plan, and the date of effectiveness of the amendments to the Existing Warrants and any other matters pertaining to TSX approval of the Private Placement.
Forward-looking statements are based on assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, including, but not limited to, expectations and assumptions concerning: interest and foreign exchange rates; capital efficiencies, cost saving and synergies; growth and growth rates; the success in the esports and gaming media industry; the Company's growth plan, and judgment applied in the application of the Company's accounting policies and in the preparation of financial statements in accordance with applicable financial reporting standards; and uncertainties and assumptions regarding future approvals of shareholders, the TSX or third parties. While Enthusiast Gaming considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. Readers are cautioned not to place undue reliance on forward-looking statements. In addition, forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse industry events; and future legislative, tax and regulatory developments. Readers are cautioned that the foregoing list is not exhaustive. For more information on the risks, uncertainties and assumptions that could cause anticipated opportunities and actual results to differ materially, please refer to those factors discussed in greater detail under the "Risk Factors" section in Enthusiast Gaming's annual information form for the year ended December 31, 2024, which is available under the Company's profile on SEDAR+ at www.sedarplus.ca. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement and reflect the Company's expectations as of the date hereof, and thus are subject to change thereafter. Enthusiast Gaming disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Neither the TSX nor its Regulation Services Provider (as that term is defined in policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
