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 07/07/2023
Week ended 07/07/2023
Debt Commentary
Week ended 07/07/2023
- Debt accounted for 81% 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. See our Insights section for more explanation.
The Week’s Largest Closed Debt Issue:
- On July 5, 2023, COMPASS Pathways (CMPS: Nasdaq), the second largest Psychedelic sector company in our database, entered into a loan and agreement with Hercules Capital for maximum borrowings of $50M
- The loan has immediate funding of $30M, with two additional $10M term loans becoming available at the discretion of Hercules.
- The loan is priced at a floating rate over Fed funds, Prime, or SOFR at the company’s choice. We estimate the current rate to be 7.64%
- The loan is priced at the greater of 9.75% and Prime plus 1.5% (Prime is 8.25%)
- Hercules also received 1.5% warrant coverage in 10-year warrants with an exercise premium of approximately -10.5%. The warrants increase the effective cost to 10.0%.
- The company can prepay the loan at premiums that begin at 2.5% and scale down to par at the end of year three.
The Week’s Most Interesting Closed Debt Issue:
- On July 7, 2023, AYR Wellness (AYR.A: CSE)(AYRWF: OTCQX), the thirteen largest U.S. MSO by market cap, closed a $40M refinancing and upsizing of its existing mortgage on its Gainesville cultivation facility.
- The refinancing pays down $25.3M, which was due in May 2024, and extends the loan to May 2026
- The loan with Needham Bank carries a floating rate at 5-year FHLB +4% which currently implies a rate of 8.26%
- The refinancing continues AYR’s program of whittling away at its substantial 2024 debt maturities, which have pressured its stock and bond prices.
- We rank AYR at #17/22 U.S. cultivation & retail companies with market caps over $20M. We believe the company will likely need to issue equity or undertake debt-to-equity swaps because it will be difficult to outgrow its debt load. Moves like this current refinancing should remove some of the specter of crises at maturity that has spooked investors.
Week ended 07/07/2023
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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.
- Week ended 07/07/2023
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 07/07/2023
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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
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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.