Curaleaf Holdings (OTC:CURLF) struck a new financing deal that should help to shore up its cash reserves.
The U.S.-based cannabis dispensary company said on Dec. 20 that a syndicate of lenders would provide it with a new 48-month, $275 million term loan facility.
"This transaction is a historic milestone for Curaleaf," Curaleaf CEO Joseph Lusardi said in a press release. "Our track record of continuously improving results has attracted a strong group of institutional investors who share our belief that we have established a leading credit profile in the cannabis industry."
Curaleaf's strong operating results made the deal possible. The multistate operator grew its total managed revenue -- which includes sales from its dispensaries, as well as revenue from its managed entities -- by 33% sequentially and 201% year over year, to $73.2 million in the third quarter. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), meanwhile, surged by 169% sequentially and 386% year over year, to $9 million.
Curaleaf's new term loan facility bears a relatively high interest rate of 13% per annum. This is due to the high-risk nature of the cannabis industry, which remains early in its growth cycle and faces significant political and regulatory risks.
Still, Curaleaf notes that the new financing has no equity component, so existing shareholders won't see their ownership percentage decline as a result of the company issuing new shares. "Importantly, we have raised debt capital at attractive terms without the need to dilute our shareholders," Lusardi said.
Curaleaf will use the proceeds to refinance existing debt, pay for its previously announced acquisitions, and fuel its future growth. "We believe this additional capital fortifies Curaleaf's balance sheet to take advantage of the significant market opportunities that exist in this space," Lusardi said.
Regulators recently signed off on Curaleaf's acquisition of Acres Cannabis. The privately held cannabis company operates two retail stores in Nevada and owns 37 acres of land in the state.
"As our business continues to scale and generate positive free cash flow, this additional capital puts us in a position of strength and provides us with ample liquidity to execute on our strategy," Davidson said. "Further, we believe our pending acquisitions, most notably Select and Grassroots will benefit from our expanded balance sheet, both of which are expected to close early next year."
Curaleaf expects the term loan facility to be completed by Jan. 10, subject to customary closing conditions.