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Medicinal cannabis company Cann Group (ASX: CAN) has successfully restructured its debt position from almost $75 million down to just $14.45 million after longstanding lender National Australia Bank (ASX: NAB) agreed to forgive debt in exchange for a large payout.
In late October, Cann Group's CEO Jenni Pilcher described the deal with NAB as a "landmark agreement", with the major financier eliminating approximately $70 million of their debt for a payment of $15.3 million, "providing a clean foundation for the company’s next growth phase".
Cann Group took two key steps to obtain funding for the payment while bolstering its balance sheet, securing a further $9 million from an existing lender - an unnamed Australian private credit fund - which it already owed more than $5 million, while also raising another $9 million through a placement and share purchase plan (SPP).
Both elements of the equity raising were approved by shareholders at Cann Group's annual general meeting (AGM) late last month, as well as the issuance of more than 63 million options for the private equity fund lender, representing around 4 per cent of the volume of shares on issue.
These options are exercisable with a two-year expiry at 1.46 cents per option, compared to the current CAN share price of 0.8 cents per share (cps).
"The successful completion of this transaction represents an important milestone for Cann," says Cann's new chairman Mike Ryan, whose appointment was revealed at the announcement of the raise and debt restructure, before starting in the role on 1 December.
"The restructure significantly strengthens the Company’s balance sheet, improves near-term liquidity, and provides a more sustainable capital structure to support the ongoing execution of our strategic priorities," says Ryan, who previously headed up equities at Shaw and Partners for six years and spent more than a decade at Goldman Sachs as an executive director before that.
"We appreciate the continued support of our shareholders and lenders throughout this process, and we remain focused on driving operational performance and long-term value creation for all stakeholders."
The agreement with NAB was announced after a protracted period of loan payment extensions. At the end of 2023 the Melbourne-based company had debts of $64 million which grew to $74.8 million in borrowings by the end of June this year.
At that same juncture, the group had accumulated $191.8 million in losses since inception with a large part of that coming from the construction of a capital-intensive $115 million Mildura production and manufacturing facility.
The company's bottom line improved a lot in FY25 with its annual net loss reducing from $51 million to $22 million, however this is still only marginally better than Cann Group's result in FY21.
Its EBITDA result was also $5 million in the red, which is in sharp contrast to postive EBITDA forecasts in the range of $0.3-0.7 million for the current financial year, with guidance that revenue will rise by 50 per cent to around $17 million.
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