Chart of the Week
The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from that week’s Deal Tracker that we believe are impactful for investors, companies and acquirers.
Viridian Capital Chart of the Week: FIXED CHARGE COVERAGE IS TIGHT FOR MANY MSOs IN 2025; SKIPPING 280e TAXES ISN’T JUST A LUXURY
- The Viridian Chart of the Week shows that aside from Trulieve (TRUL: CSE), GTI (GTII: CSE), and Verano (VRNO: Cboe), not paying 280e taxes is critical in covering fixed charges without dipping into cash balances.
- The bars on the chart add layers of fixed charges: Black represents non-280e taxes, red shows the additional taxes from 280e, brown is operating lease expense, green depicts interest expense, purple is capital spending, and blue is debt maturities.
- The orange line represents EBITDAR, calculated by adding consensus 2025 EBITDA estimates to Viridian’s estimate of 2025 operating lease expenses. The brown line adds in each company’s cash balance as of 12/24.
- The graph shows that EBITAR is only sufficient to cover all fixed charges for Trulieve, GTI, and Verano, each of which could actually pay 280e taxes with free cash flow remaining.
- Adding back 280e taxes allows all the companies on the chart to cover their fixed charges, except AYR (AYR.A: CSE), Cannabist (CBST: Cboe), Glass House (GLASF: OTC), and Vext (VEXT: CSE).
- All companies on the list except Cannabist can cover their fixed charges with a combination of skipping 280e and modestly dipping into cash balances.
- The analysis is conservative because we assume that debt maturities need to be paid out of cash flow, whereas that is usually not the case. Cannabis, however, has less than 1x projected interest coverage and significant maturities in both 2025 and 2026, necessitating the debt restructuring plan that the company is now pursuing.
- AYR will face a similar reconning in 2026 and will likely require another restructuring of its debt, but for 2025, the company has a bit of room to maneuver.
- Investors need to look past simple EBITDA coverage ratios and review the entire list of fixed charges that their portfolio companies need to address.
