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Guiding a cannabis wellness company though a liquidity crisis
From risk to reward
The challenge
Navigating crises is part of operating a business, but when your business operates in a heavily regulated industry, it can mean sinking or swimming. Our client—a New Brunswick-based cannabis company that manufactured and distributed wellness products—was facing a liquidity crisis when a key stakeholder declined to advance a critical sum under a binding subscription agreement. This triggered increasing financial issues, including missed excise tax payments to the Canada Revenue Agency (CRA) and a notice that the client’s cannabis license would be revoked. With so much at stake and the possibility of shutting down operations affecting employees and customers across Canada and international markets, they needed help developing a viable restructuring plan as well as strategic advice to guide them through an overwhelming period.
How we helped
Prepared financial analyses, including cash flow forecasts and creditor information to support management’s applications for a stay extension and sales process.
Acted as the Proposal Trustee when our client filed a Notice of Intention to Make a Proposal to its Creditors (NOI) to help preserve the company’s value, maintain going-concern operations, and allow a restructuring plan to be developed.
Assisted with the court supervised restructuring of the company and facilitating a court-supervised sale and investment solicitation process.
Through a reverse vesting order from the court, completed a transaction successfully that was efficient and timely, which allowed the company to exit the formal restructuring process and continue as a going concern.
Our client is an award-winning leader in wellness within Canada’s cannabis industry, recognized for excellence in product development and cultivation. With deep experience helping cannabis businesses, our team understood their unique challenges as well as the key actions required to support a successful restructuring process. By preparing financial analyses, including cash flow forecasts and navigating stakeholder communications, we supported our client’s applications to affect a successful restructuring. As liquidity pressures intensified, they sought approval of a debtor-in-possession credit facility from a related party lender which was approved by the Court alongside the sale and investment solicitation process, which we exclusively oversaw. From restructuring, and facilitating the sale transaction, our team helped the restructuring process run smoothly.
The impact
Despite operating in one of Canada’s most heavily regulated industries, where ongoing compliance with Health Canada and the CRA is essential and closely monitored, the restructuring of our client’s business is a testament to how a disciplined Court-supervised process, supported by the right people, can stabilize even the most vulnerable cannabis businesses. Our team worked with the company to enable its success and advance the file from initial NOI protection to a transaction-ready outcome, maximizing stakeholder benefit.
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