OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
Debt Capital Raises
Debt Transaction Chart
Viridian publishes weekly data and analysis on debt capital raises in the Cannabis/CBD/Psychedelic industries. This data includes information about the company issuing debt (public/private, state/country location), deal size, deal structure, pricing, warrants, and credit data.
Week ended 10/28/2022
Week ended 10/28/2022
Debt Commentary
Week ended 10/28/2022
- Debt accounted for 86% of trailing 4-week capital raises, primarily due to Verano’s $350M refinancing debt deal. We expect to see a wave of these refinancing transactions and have already seen deals from TerrAscend (TER: CSE) and Verano (VRNO: CSE). One of our recent Charts of the Week highlighted the significant upcoming maturities facing Verano), TerrAscend, Jushi (JUSH: CSE), and AYR (AYR.A: CSE). Two of the four have already completed significant refinancings, and we would not be surprised to see the other two follow similar paths. Several smaller tier 2 and tier 3 companies have similar liquidity crunches coming up that we believe will spur an increase in debt financing.
The Week’s Largest Debt Raise:
- On October 27, 2022, Verano Holdings (VRNO: CSE), the fourth largest U.S. MSO by market cap, completed a $350M refinancing of its existing credit line.
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- The new four-year facility has initial availability of $350M but envisions $270M of additional debt: $100M of Real Estate backed debt, $100M accordion, and a $50M revolving credit facility conditioned on the passage of the SAFE Act.
- The facility has an initial interest rate of 12.75% (Prime plus 6.5% with a prime floor of 6.25
- Monthly amortization payments of $350,000 beginning on October 31, 2023
- A reasonable covenant package includes the following:
- Minimum Liquidity of $35M
- Minimum EBITDA of $30M per quarter. Note that consensus estimates for the third and 4th quarters of 2022 are $77.4M and $86.5M, respectively. It isn’t easy to match the analyst projections to the definition of EBITDA in the credit agreement, but we generally believe this covenant has adequate room for moderate underperformance.
- Debt Service Ratio of over 1.5x
- The terms of this transaction are favorable: covenants are fair, amortization is modest, and baskets for additional debt are reasonable.
- Interestingly, Verano is paying approximately the same rate as TerrAscend and about 150bps more than Acreage. The chart below shows our credit scoring of each MSO with more than 100M market cap and the interest rates for the most recent three financings.
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Week ended 10/28/2022
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Weekly Credit Tracker
Each week, Viridian highlights a specific industry sector and provides a deep dive into credit metrics and comparable company credit rankings for public companies operating in that 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 10/28/2022
This week’s credit tracker focuses on the 7 Canadian Cultivation & Retail sector companies with market caps between $50M and $500M in the Viridian Value Tracker database in order to make the case that Auxly had a good reason to sell assets, even at prices significantly below its cost: The firm is over levered and needs to sell assets to reduce debt. The Viridian Credit tracker ranking system shows Auxly near the bottom of the peer group in terms of credit quality.
- Week ended 10/28/2022
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Additional content is available to Premium and Enterprise users. Please purchase a higher tier membership to see more.
This Chart is Only Available to Higher Tier Memberships
Please Purchase a Premium or Enterprise membership to see more.
Viridian publishes weekly insights on debt capital raises in the Cannabis/CBD/Psychedelic industries. These insights typically highlight the most interesting/meaningful debt transactions of that week, and commentary on market conditions, debt deal structures, and lenders.