After the market closes on Monday, Curaleaf announced that it had received commitments for a private placement of 8.0% Senior Secured Notes maturing in 2026 for total gross proceeds of $ 425 million. This is the largest debt financing of any publicly traded U.S. cannabis company in history and at a rate that is also one of the lowest in the industry.
Joseph Bavaria, CEO of Curaleaf (OTC: CURLF) said: âThis offering will allow us to refinance our existing debt at a significantly lower interest rate and gives us additional financial flexibility to execute our strategic growth initiatives. While this initial offer provides more than enough liquidity to refinance our existing debt and meet current needs, the new trust indenture gives us a new degree of flexibility to raise debt financing to ensure that we have sufficient liquidity. to meet our current and future needs. “
Stifel analyst Andrew Partheniou released a debt note saying he maintains a buy rating on the company and a price target of C $ 31 ($ 24). His report said: âWe estimate that the MSO could save about $ 20 million in annual cash flow through refinancing (the highest going rate at 13.0%), which translates into an increase in about 13% of our existing 2023e EPS forecast. Overall, we see favorable conditions as the fruits of the company’s extensive presence with the only MSO having a national presence, attractive exposure to three REC market conversions in the tri-state area, and an international option with the new German government indicating the desire to legalize cannabis.
Partheniou added that Curaleaf could issue additional notes as needed under a trust indenture up to $ 200 million, subject to leverage ratios, among other conditions. âThe transaction is expected to close on December 15, 2021 and the proceeds are expected to be used for refinancing and working capital,â he noted. âProforma of this agreement, refinancing all of its existing debt of approximately $ 360 million, repayment / financing fees and previously announced mergers and acquisitions, we estimate CURA’s pro forma cash balance at approximately $ 200 million. dollars, excluding approximately $ 155 million in potential proceeds from ITM securities. Its debt position paints an equally favorable picture with a proforma estimate of around $ 400 million and a healthy interest coverage ratio of around 8.5x or 1.4x debt / EBITDA. As a result, we believe the company could take this additional funding and maintain a strong balance sheet, providing continuing ammunition for further mergers and acquisitions or to fund organic growth initiatives on its broad platform. “
Stifel further illustrated the interest rate obtained by Curaleaf by comparing it to other MSOs and the rates to which they were subjected. Some rates are not much better than a traditional credit card.
The analyst went on to say that his positive view of CURA is based on: “1) CURA being the largest cannabis company in the world, offering the advantage of not only ideal diversification from the markets of State and the only company with a real presence but also an attractive deal flow volume; 2) a solid history of mergers and acquisitions with more than 1 billion dollars of capital deployed while also carrying out all the announced transactions; and 3) the best access to capital with the largest equity financing in the history of US industry.
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