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: What Would a Real Restructuring Plan for AYR Look Like?
- On May 30, 2025, AYR Wellness (AYR.A: CSE)(AYRWF: OTCQX) announced that it would be unable to file its first-quarter financials on time due to the undertaking of a strategic review process regarding its upcoming debt obligations. AYR has retained Moelis & Company LLC to “explore capital structure alternatives, among other things. Furthermore, AYR has entered into negotiations with a committee of its senior lenders representing over 50% of the senior secured notes due December 2026.
- When we spoke at MJUNPACKED on the topic of the upcoming debt “tsunami,” we identified AYR and 4FRONT as two of the most difficult refinancing situations. We presented an earlier version of the restructuring plan shown in the table, noting that we believed the most likely scenario would be another Amend, Extend, and Pretend maneuver, similar to what AYR concluded in February 2024 and what Cannabist (CBST: Cboe)(CBSTF: OTCQB) recently completed.
- A month has passed, and 4Front has announced a voluntary receivership, but AYR has not made any public statements. The hiring of Moelis and ongoing negotiations with the senior lenders now make a complete restructuring along the lines we present here more likely.
- The essence of our plan is to exchange $120 million of the maturing 13% notes due 2026 for approximately 91% of the company’s equity by issuing 1.2 billion shares at a conversion rate of $0.10 per share to the noteholders. The remaining $173 million of 13% notes would be extended by three years, with a company option to extend an additional year for a fee to be determined.
- We anticipate paying now $20M of the $64M in other maturing debt with the proceeds of asset sales (perhaps the Virginia license) and extending the maturities of the remaining $44M for three years, with an option for another one-year extension through payment of a fee to be determined.
- Non-maturing debt would be asked to extend maturities a minimum of three years to a maturity date no earlier than the maturity of the remaining 13% notes.
- The results of this plan are a capital structure with a sustainable debt load. Net debt/ 2025 EBITDA would be 2.5x.
- We value the extended bond at a 20% yield and estimate it would trade at around 85%. The total recovery for the bondholders is 97% of par, a gain of 50% from last week’s offered price of 65%.
- Perhaps more surprisingly, the transaction is also positive for the equity holders. Currently, they own 100% of a $13M market cap, whereas after this transaction, they would own 9.07% of a new market cap of $153.17M, for a total value of $13.89M. We would also propose giving the former equity holders an equivalent of 1.2 billion shares’ worth of warrants struck at a 300% premium. Debt holders should not object much, as they would be thrilled to see such a high stock price.
- Are the days of kicking the can down the road about to end? We think so; after all, hope is not a strategy.
