After years of sitting on the sidelines, Canada’s top-tier financial institutions are increasingly teaming up with the country’s biggest cannabis companies to help fund their aggressive growth plans.
Alberta-based Aurora Cannabis on Tuesday tapped the Bank of Montreal – Canada’s fourth-largest bank by revenue – for 200 million Canadian dollars ($150 million) in debt.
The deal includes a CA$150 million term loan and a CA$50 million revolving-credit facility.
Cam Battley, Aurora’s chief corporate officer, said the deal is about 10 times larger than any previous term loan, making it a “game-changer” for the marijuana industry.
“We’re going to be entering each of the European markets as they cascade open,” Battley said.
A day earlier, Aurora announced it had made the first medical cannabis shipment to Malta.
Growing debt financing is a significant milestone, according to Glen Shear, global cannabis expert and former executive director of CIBC World Markets.
“Clearly, both parties benefit materially,” he said. “Aurora obtains low-cost, nondilutive financing, as well as institutional validation. BMO takes a courageous leadership role in one of the globe’s most dynamic and medically meaningful industries.”
Since 2014, cannabis companies have largely financed expansion through equity deals, but debt is increasingly becoming part of the equation.
Debt financing rose from CA$145 million in 2016 to CA$663 million in 2017.
CEO John McMullen of LGC Capital, an investment firm in Toronto, said the move to more debt financing is a natural evolution for the cannabis industry.
“It shows large institutions are waking up,” he said. “They’re validating an industry in Canada that could become a global leader.”
Matt Lamers can be reached at [email protected]
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