Canadian cannabis producer CannTrust Holdings says it doesn’t have sufficient liquidity to operate beyond the near term and is developing a plan to wind down in case more financing doesn’t materialize.
The Vaughan, Ontario-headquartered company also said its fourth Companies’ Creditors Arrangement Act (CCAA) plan has been implemented, resulting in four directors resigning from the board, effective immediately.
Those directors are:
- Board chair Robert Marcovitch.
- Mitchell Sanders.
- Mark Dawber.
- Shawna Page.
“CannTrust’s CCAA proceedings are continuing to facilitate further discussions with potential investors and strategic partners, and to develop an orderly wind-down plan to maximize the value of its assets in the event that a financing or strategic transaction option cannot be finalized,” CannTrust said in the update.
The implementation of the latest CCAA plan follows approval of a U.S. class action settlement by the U.S. District Court for the Southern District of New York on Dec. 2, 2021.
CannTrust contributed $50 million to a trust to facilitate class action settlements and an additional $2.7 million to settle various claims under its CCAA proceedings.
In the update, CannTrust also said it is in default of the minimum earnings before interest, taxes, depreciation and amortization (EBITDA) covenant under its debtor-in-possession (DIP) loan.
The DIP lender has not agreed to waive the default, although it continues to advance funds under the facility, according to a CannTrust news release.
The company’s federal licenses were suspended in September 2019, months after a whistleblower alerted regulators to illegal production.
At the time, CannTrust was one of the biggest cannabis companies in Canada, with an active medical clientele of 67,000 customers.
The company’s standard cultivation and processing licenses for its Niagara facility were reinstated in 2020.
Three former directors, including its former chief executive officer, face charges such as fraud and making false or misleading statements.
Those executives are Peter Aceto, the company’s CEO at the time of the alleged incidents; Mark Litwin, a director of the company at the time; and Eric Paul, a former CannTrust chair.
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Lawyers for the men have said their clients are innocent.
CannTrust’s current stay period extends to Jan. 31, 2022.
For more on CannTrust’s CCAA proceedings, click here.
– Matt Lamers