Canopy Growth just picked up more funds with which it can work on its expansion plans. As possible legalization of cannabis is looming in the US, and other countries are making strides toward their own legalized markets, the company has secured a new credit facility with King Street Capital Management. The new credit line will give Canopy Growth an ample supply of cash moving forward.
According to an announcement by the company, the new credit facility is a senior secured term loan for $750 million. In addition, if it needs to, Canopy Growth can access another $500 million of incremental senior secured debt. There are no amortization payments associated with the agreement, which will mature on March 18, 2026.
EVP and CFO of Canopy Growth Mike Lee states, “We are delighted to welcome King Street as our anchor debt investor and look forward to building value for both our credit and equity investors over time. This transaction further strengthens Canopy’s balance sheet, provides additional capital to invest in high-return growth opportunities, and marks a key milestone for us as we work towards achieving a more efficient capital structure.”
The gross proceeds of the loan facility, outside of any requisite fees and expenses, will give Canopy Growth working capital to be used for growth investments, acquisitions, expenditures and other strategic initiatives. The credit line includes a coupon of LIBOR plus 8.50% and is subject to a LIBOR floor of 1%. Canopy Growth explains, “Giving effect to the net proceeds from the Term Loan Facility, the Company’s estimated pro forma cash, cash equivalents and short-term investments position as at December 31, 2020 would have been approximately [US$2.002 billion].”
King Street apparently didn’t have any reason to hesitate in agreeing to the loan facility. It indicates that it has been monitoring the company and is impressed with its growth “as a leader in the Canadian market.” It adds that it is available to assist Canopy Growth with any future expansion plans it has going forward, as well.