Another significant capital financing has occurred in the U.S. cannabis industry courtesy of MariMed, Inc. MRMD. Newly appointed CEO John Levine spoke with TDR Founder Shadd Dales to talk about the particulars of the deal addressed the recent loss of former CEO Bob Fireman, who was instrumental to the company’s present success and identity.
As reported after market today, Marimed Inc. closed a secured credit facility with Chicago Atlantic Advisors, LLC as the lead lender. The $35 million credit facility—$30 million of which was borrowed at close—has a three-year maturity and an ability to extend to a five-year maturity under certain conditions. The facility bears interest at a floating rate based on bank prime rate plus 5.75% and includes 30% warrant coverage priced at a 20% premium.
As of January 20, the U.S. bank prime loan rate was sitting at 7.5%, as per yCharts.
Although MariMed had enough capital to fund its current expansion plans, additional capital will allow the company to expedite its growth curve. New funds procured will be earmarked for the build-out of a new cultivation and processing facility in Illinois, a new processing kitchen in Missouri, expanding existing cultivation and processing facilities in Massachusetts and Maryland.
In early November, voters in both Missouri and Maryland approved ballot measures to allow adult-use cannabis sales in their respective states.
While Jon Levine was visibly flabbergasted that cash-flow positive MariMed was forced to pay interest at rates well above what non-cannabis businesses pay, the company has received satisfactory terms on a relative basis:
Jon Levine: We started talking to all these investment bankers about what the rates (for credit facilities) were. I was amazed at the numbers we were hearing. And we met with…
Shadd Dales: What were some of the numbers you were hearing?
Jon Levine: Eight to ten percent over prime. And that ten percent over prime would make most people throw up just having to pay ten percent interest. I was noxious over the number of five. And, you know, it’s where we ended up. But, that is one of the lowest (interest rates) in the industry…
While the current debt facility registers approximately 13.5% on an annualized basis, MariMed’s aggregate interest rate across all debt is much lower. According to Chief Financial Officer Susan Villare, “our blended interest rate is 10.5% and Debt/EBITDA ratio of 1.5X remain among the lowest in the cannabis industry.”
The blended interest rate is calculated as the weighted average rate of all interest-bearing loans, including seller notes, mortgages, and the first draw of the $35 million credit facility.
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