Weekly Sector Credit – Cultivation and Retail

• • The median total liabilities to market capitalization ratio has continued to improve significantly, from 1.12x on 8/15/25 to 1.47x on 8/11/25 and 1.92x on 8/1/25. Our option modeling indicates that this change means the market now believes the sector has 1.8 times asset coverage of liabilities, compared to only 1.4 times at the beginning of the month. That’s quite a dramatic change in a month.
  • Liquidity has actually deteriorated somewhat. Our bespoke, free cash flow-adjusted current ratio has a median value of only 0.87x as of August 15, 2025, compared to 0.93x as of August 1, 2025. This impact is all related to the updated 2^nd quarter financials. A median of under 1x indicates that more than half of the 71 companies will require additional funding during the next twelve months. We will be keeping a close eye on this number as we approach year-end and the sizable 2026 debt maturities begin to appear as current liabilities. One thing is fairly clear: liquidity for the sector is likely to worsen as the 2026 maturities get closer.