Chuck Rich and Jonathan Sherman have been quoted in the Financial Post’s article titled “Canopy’s $500 Million Raise Means Debt May Finally be on the Horizon for Cannabis Companies,” published on June 22, 2018.
Writes Mark Rendall: “Dealmaking appears to be maturing, but before traditional lenders think about moving in, they’ll look for some collateral other than marijuana.”
Says Chuck: “One could argue that the licence itself is one of the most valuable assets that one of these companies would have, but those licences are not transferable. Then you have the inventory, which most businesses would want to put up as collateral, but banks are not going to have any interest in taking cannabis itself as collateral.”
Many cannabis companies also have considerable real estate assets. But as Jonathan notes: “There are not that many lenders in the space that want to buy a massive greenhouse out in the country that has way more security than anyone would ever need to grow tomatoes…. The real trigger here is going to be receivables, and as soon as we start seeing some cash flow and some receivables from the recreational market then I think you’ll start to see some debt deals.”
Cassels Brock acted for Canopy Growth in its $500 million offering – the largest financing to date in the cannabis industry.