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 07/21/2023

Debt Commentary

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.

Week ended 07/21/2023

  • Debt accounted for 75% of trailing 8-week capital raises. We expect this ratio to be volatile because of the limited capital raise activity. With cannabis stocks trading at or near their 52-week lows, we expect debt to continue to account for more than 50% of capital raises. Several large MSOs have now come close to maxing out their debt capacity and may be forced to issue equity, even at the cost of dilution.

 

The Week’s Only Closed Debt Issue:

  • On July 17, 2023, Avant Brands (AVNT: TSX)(AVTBF: OTCQX), a $40M market cap Canadian producer of high-quality, handcrafted cannabis products, closed a $2.65M secured credit facility.
  • The three-year term facility is priced at 15% with potential increases based on any increases in Prime.
  • The facility is secured by the real estate of the company’s non-operational and non-licensed real property owned by subsidiary GreenTec Holdings and guaranteed by certain subsidiaries, including 3PL, Flowr Okanagan, and GreenTech.
  • The company also issued 1.75M three-year common share purchase warrants with an exercise price of $.23, an 89.15% premium to the stock’s closing price on the transaction date. Warrant coverage of the facility is approximately 15%. The low warrant coverage and high premium reduce the value of the warrant package to about .45 bond points and only increase the effective yield from 15% to 15.19%
  • At first blush, the pricing seems aggressive; however, the Viridian Capital Credit model ranks Avant as the #1 out of the eighteen U.S. and Canadian cannabis companies with between $20M and $100M market caps. Avant has the lowest leverage of the group, strong liquidity, positive Adj EBITDA, and positive cash flow from operations. See the Viridian Capital Chart of the Week for more detail on the credit and valuation metrics of Avant and its peer group.

Week ended 07/21/2023

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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.

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. 

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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.