Cannabis retail chain Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWF) is getting access to a significant loan facility from its partner in the convenience store business.
On Monday, the company said it’s entered into a loan agreement with a wholly owned subsidiary of Cirle K-owner Alimentation Couche-Tard Inc. (TSX: ATD) for up to $30 million.
The amount can be drawn in three separate tranches of $10 million. The loan will accrue interest at an annual rate of 8 per cent, is payable quarterly and will mature on Oct. 1, 2022.
Fire & Flower says the deal “contemplates” prepayments via proceeds from ACT exercising warrants which become available Jan. 1, 2022. The loan is secured by assets in the company.
The company says the funds from the loans will be used to further develop its digital retail platform, as well as for general corporate purposes.
Access to $30 million in debt financing is a strong show of support from ACT, and serves as proof of the companies’ alignment on the future of cannabis retail, Fire & Flower CEO Trevor Fencott says in a statement.
“Through their leadership, network and expertise, we are accelerating the dynamics of the retail shopping experience and creating a consumer-centric marketplace that leverages technology and data-driven insights to deliver a personalized collection of products to consumers and reaches them wherever they are at,” he continues.
“As we move forward in our development, we are excited to continue to leverage this relationship and further expand our co-located store program to deliver the most convenient shopping experience to our customers.”
ACT holds more than 10 per cent of outstanding voting securities in Fire & Flower, according to a statement. Given that, the company says its relied on exemptions to related-party transaction rules. More details are set to come in a material change report.
Company stock was down around 4 per cent Monday to around $6.07 on the Toronto Stock Exchange.
In July 2020, Fire & Flower first started adding pot shops next to two Circle K stores in Alberta. In October 2021 the firm said it was adding more adjacent stores in Alberta, Saskatchewan and Manitoba, following success of the initial pilot.
That deal also includes the opportunity for further expansion in Ontario and the U.S.
In August, Fire & Flower opened its first branded location in America, by way of a licensing deal with Fire & Flower U.S. Holdings, formerly American Acres Managers.
In September, Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) made a deal with Circle K to sell CBD vapes in U.S. stores.