Canadian cannabis producer Cronos Group is funding its joint venture, Cronos Growing Co., with a $51 million ($70 million Canadian dollars) secured credit line to expand operations to meet increased global demand.
As part of the transaction, Cronos will appoint three new members to the GrowCo board on July 1, according to a press release issued Thursday.
Under a new supply agreement, Cronos will have the option to purchase up to 70% of total production from the expanded facility.
“This investment enables GrowCo to increase its production of high-quality cannabis, which supports our ambition to expand across the markets we operate in and add new international growth opportunities where they arise,” Cronos Chair and CEO Mike Gorenstein said in a statement.
GrowCo intends to use the credit line to expand its production facility in Leamington, Ontario.
The interest rate for the credit facility is equal to the Canadian Prime Rate plus 1.25%, due quarterly.
However, GrowCo will begin repaying the $51 million principal the quarter after sales commence from the newly constructed space.
The credit line will mature 10 years after sales commence, expected in the second half of 2025.
The credit facility is secured by property of GrowCo and its subsidiaries.
Terms of the CAD$105 million credit facility that Cronos previously made available to GrowCo is unchanged.
Cronos will consolidate the joint venture’s results in its financial statements beginning in the third quarter.
MJBizDaily reported in March that Cronos cut its loss in half in 2023, reporting a deficit of $74.5 million (CAD$101 million).
Consolidated net revenue inched higher in the 2023 fiscal year ended Dec. 31, rising to $87.2 million from $86.7 million in the previous year, according to the company’s full-year business results.
