American cannabis operator Acreage Holdings, Inc. (CSE: ACRG.U) — which is slated to be acquired by Canopy Growth Corp. (TSX: WEED) (Nasdaq: CGC) come federal legalization — has entered into a large debt facility for expansion and to help with its balance sheet.
In a statement Thursday, the New York-based company said it secured a US$150-million credit facility with AFC Gamma, Inc. (Nasdaq: AFCG) and Viridescent Realty Trust, Inc.
Under the terms of the loan, US$100 million is available immediately, with US$50 million available in future once certain milestones are achieved.
Acreage says it will use the proceeds to fund expansion initiatives, repay existing debt and provide additional working capital.
The credit facility has an annual interest rate of 9.8 per cent, payable monthly, with a maturity date of Jan. 1, 2026.
AFC will provide US$60 million, with an additional US$10 million syndicated to an affiliate, of the US$100 million available immediately, and US$30 million will be held by co-agent Viridescent.
The loan is secured by first-lien mortgages on Acreage’s wholly owned real estate and other commercial security interests.
Acreage notes that its board chairman Kevin Murphy is also the president and board chairman at Viridescent, so the latter firm’s participation in the loan is a “related party transaction.”
The firm says it relied on exemptions from formal valuation requirements, as it doesn’t have securities listed on a prescribed stock exchange.
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It also says it’s exempt from minority shareholder requirements, “as the related party’s participation in the credit facility is on the same terms as AFC Gamma, a person dealing at arm’s length to Acreage.”
The financing is a strong recognition of the significant work the company has done to position it for long-term success, CEO Steve Goertz said in a statement.
This non-dilutive source of capital further enhances our balance sheet and provides us with increased financial flexibility as we continue to focus on driving profitability and accelerating growth in our core markets to ultimately maximize shareholder value,” he said.
In November, the firm reported third-quarter revenue up 9 per cent to US$48.2 million, net loss of US$12.3 million, as well as cash and cash equivalents of $27.9 million.
In June 2020, Canopy said it would pay US$843 million to acquire Acreage in a deal contingent upon the U.S. legalizing weed federally. That price was a significant drop compared to the $3.4-billion size of the deal when it was initially announced in June 2019.