PharmHouse, a Canadian cannabis joint venture partly owned by venture-capital firm Canopy Rivers, received an initial court order granting creditor protection while the company explores restructuring.
The creditor protection order comes after Canopy Rivers’ 51% partner in the joint venture, 2615975 Ontario, filed a lawsuit against Canopy Rivers, Canopy Growth and TerrAscend alleging fraud and civil conspiracy, according to The Globe and Mail.
“The lawsuit alleges that Canopy and its partners conspired to try to force PharmHouse to renegotiate supply contracts after it became clear that the purchase agreement price was higher than the market price,” the newspaper reported.
Marijuana Business Daily has not viewed the statement of claim in the legal action.
Canopy Rivers said it considers the claim “as it relates to the actions of Canopy Rivers to be completely without merit,” and plans to “vigorously defend its position.”
On Wednesday, Canopy Rivers said PharmHouse faces “liquidity and capital resource issues” after a timeline for offtake agreements was not met.
Attempts to renegotiate the offtake agreements have failed, Canopy Rivers said.
“Given the scale and automation of PharmHouse’s facility, Canopy Rivers remains committed to taking the necessary actions to preserve and maximize value for PharmHouse and Canopy Rivers’ shareholders, including providing (debtor-in-possession) financing.”
Canopy Rivers will provide as much as 7.2 million Canadian dollars ($5.5 million) in debtor-in-possession financing as the restructuring process proceeds.
PharmHouse joins a long list of troubled Canadian cannabis companies that have sought creditor protection in the past year, including:
Canopy Rivers shares are traded on the Toronto Stock Exchange as RIV.