OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS

Credit Tracker By Industry Sector

Credit Tracker By Sector

Credit ratings are not currently available for public cannabis companies leaving companies, lenders and investors with a gap of information. The Viridian Cannabis Credit Tracker fills this gap. The model uses 11 market and financial statement variables to discern 4 key credit factors: Liquidity, Leverage, Profitability, and Size, to provide credit/liquidity analysis for over 370 public Cannabis/Hemp companies.

Week ended 02/10/2023

The Viridian Credit Tracker utilizes 11 different bespoke credit ratios to evaluate four aspects of credit quality: Liquidity, Leverage, Profitability, and Size. We are fascinated by a pattern we see in the credit data across our 12 subsectors of cannabis.  All of the sectors currently have median free cash flow adjusted current ratios of under 1x, indicating the likely need for financing during the year.  Meanwhile, leverage is quite low across the industry.

The highest median debt/ mkt cap is for the Cultivation & Retail sector at 1.04x, a number that we would not think twice about if we looking at the High Yield credit market.  The combination of these statistics indicates to us that there is room to solve most of the industries liquidity thirst with new debt issues.  The complicating factor here is that we have an extreme risk aversion in the investor base, bourne by the disasterous returns experienced in 2022 and in conjunction with that, our impression is that most of the “easy” collateral, namely real estate, has already been utilized in sale leasebacks or mortgage debt.  Assets available for pledging now are less attractive: real estate and working capital and a significant part of working capital is inventories which is not available to collateralize. It will be fascinating to see these factors play out over the course of 2023.

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Week ended 02/10/2023

The Viridian Credit Tracker utilizes 11 different bespoke credit ratios to evaluate four aspects of credit quality: Liquidity, Leverage, Profitability, and Size. We are fascinated by a pattern we see in the credit data across our 12 subsectors of cannabis.  All of the sectors currently have median free cash flow adjusted current ratios of under 1x, indicating the likely need for financing during the year.  Meanwhile, leverage is quite low across the industry.

The highest median debt/ mkt cap is for the Cultivation & Retail sector at 1.04x, a number that we would not think twice about if we looking at the High Yield credit market.  The combination of these statistics indicates to us that there is room to solve most of the industries liquidity thirst with new debt issues.  The complicating factor here is that we have an extreme risk aversion in the investor base, bourne by the disasterous returns experienced in 2022 and in conjunction with that, our impression is that most of the “easy” collateral, namely real estate, has already been utilized in sale leasebacks or mortgage debt.  Assets available for pledging now are less attractive: real estate and working capital and a significant part of working capital is inventories which is not available to collateralize. It will be fascinating to see these factors play out over the course of 2023.

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