TerrAscend, a North American cannabis company, together with certain entities that are consolidated by the company, closed on a senior secured term loan for gross proceeds of $140 million from funds managed by FocusGrowth Asset Management, a capital provider to the cannabis sector, along with other members of a loan syndicate.
The loan includes an initial draw of $114 million in gross proceeds by certain of the company’s consolidated entities in Pennsylvania, Maryland and California, with a second draw of $26 million in gross proceeds expected in September 2024 by the company’s consolidated entities in Michigan. The loan carries an interest rate of 12.75%, matures in August 2028, contains no prepayment penalties and is guaranteed by the company and TerrAscend USA. No warrants were issued as part of the loan.
The proceeds from the initial draw were used to retire the company’s existing indebtedness in Pennsylvania with the remainder available for potential M&A transactions focused on geographic expansion. The proceeds from the second draw will be used to retire the company’s existing indebtedness in Michigan.
“Completing this non-dilutive financing strengthens our balance sheet and provides us the financial flexibility to continue to execute on our growth strategy. With this financing closed, we have no other material debt maturing until late 2027,” Jason Wild, executive chairman of TerrAscend, said. “This transaction also reflects our lender’s confidence in our vision and strategy. The FocusGrowth team has been a pleasure to work with and we look forward to a long and successful partnership together.”
“We have closely watched TerrAscend’s progress and are excited to partner with them to support their continued growth,” Peter Bio, partner of FocusGrowth, said. “TerrAscend has established itself as a market leader in multiple states with ample greenfield opportunities for growth in both new and existing markets. We have enjoyed working with the team on this transaction and are already working with management to evaluate additional opportunities.”
The transaction constitutes a “related party transaction” within the meaning of Multilateral Instrument 61–101 Protection of Minority Security Holders in Special Transactions (MI 61–101) because Jason Wild, an insider of the company, directly or indirectly invested approximately $7.5 million of the loan as a member of the loan syndicate in connection with the transaction. The company has relied on exemptions from the formal valuation and minority shareholder approval requirements of MI 61–101 contained in sections 5.5(a) and 5.7(1)(a) of MI 61–101 in respect of the insider participation as the fair market value (as determined in accordance with MI 61-101) of the insider participation in the transaction is below 25% of the company’s market capitalization (as determined in accordance with MI 61-101).
Ventum Capital Markets acted as the exclusive financial advisor to the company for the transaction.
