Marijuana company Curaleaf Holdings Inc. has secured $275 million in financing, one of the first syndicated deals for the cannabis industry.
The senior secured term loan comes as traditional banks have steered clear of pot-linked debt amid regulatory concerns. Curaleaf’s deal, mostly provided by a slate of U.S. institutional buyers including hedge funds and loan-only debt funds, is one of the most sizable financings the cannabis industry has seen in the U.S., according to Boris Jordan, Curaleaf’s executive chairman. One large European party is also taking part in the offering.“Most of the deals that have been done before have been family-office driven or also included equity warrants,” said Jordan. “This brings cannabis more to the mainstream debt markets.”
Wakefield, Massachusetts-based Curaleaf — the biggest U.S. marijuana company with market value of $2.7 billion — interviewed roughly a dozen investment banks in August to serve as placement agent before narrowing the list down to three and ultimately selecting Seaport Global Securities LLC. A spokeswoman for Seaport declined to comment on the deal beyond Curaleaf’s statement.
“We wanted to pick a bank that could get it done because we understand that we’re charting new territory,” Jordan said.
The financing, priced at 13% and maturing in four years, will be used to refinance existing debt, pay transaction fees and expenses from previously announced acquisitions and to fund capital expenditures. About $150 million of the financing is provided by existing lenders, said Jordan, who declined to disclose the deal’s providers.
The company initially targeted an interest rate of 10% to 12%, but had to sweeten terms after other industry deals priced at higher levels and included warrants, which give the holder the right to purchase equity, Jordan said. To compare, cannabis consumer packaged goods company Green Thumb Industries Inc. earlier this year issued $105 million in pot bonds with a 12% yield, along with warrants.
In the direct lending market, cannabis and hemp accessories company KushCo Holdings Inc. priced a $50 million loan in August at 8.50 percentage points above Libor, and also included warrants.
Curaleaf has tapped institutional financing before. In August 2018, it borrowed $85 million of senior secured debt at 15% from Cetus Investments Ltd., according to Sedar filings. It also completed a $6 million unsecured bridge in June 2017 with an 11% interest rate. Since May 2018, the company has closed a number of unsecured private-placement bridge financings, also with an 11% interest rate, filings show. [Read More @ Bloomberg]
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