Winnipeg, Manitoba-based Delta 9 Cannabis entered into a binding commitment letter with ConnectFirst Credit Union to secure 32 million Canadian dollars ($25.6 million) in low-interest credit facilities.
On closing, the arrangement would result in CA$1.2 million in additional operating capital as well as principal repayment reductions worth an additional CA$470,000 per year, according to a Delta 9 news release.
The proposed credit facilities are subject to predisbursement conditions.
The arrangement with ConnectFirst, headquartered in Alberta, consists of:
- CA$23 million commercial mortgage facility.
- CA$5 million acquisition loan.
- CA$4 million overdraft loan.
The acquisition capital will be earmarked to acquire profitable businesses in Canada.
The proposed commercial mortgage facility will have a five-year fixed rate of 4.55% per year. The overdraft loan has a rate of prime plus 1.50% per year.
“As the Canadian cannabis industry has evolved you are starting to see the profitable operators with access to conventional lending at very attractive interest rates,” Delta CEO John Arbuthnot told MJBizDaily.
“This shows a stark contrast versus some of the larger nonprofitable operators, with rates above 10%, and speaks to the quality of the business models being created by some of the midsized companies in the space.”
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As a part of the closing with ConnectFirst, Delta 9 said it expects to repay its credit facilities with its current bank lender, which includes repaying CA$11.8 million of convertible debentures before they mature on July 17, 2022.
Delta 9 reported adjusted EBITDA, a measure of profitability, of CA$191,000 for the third quarter of 2021, per the company’s latest financial report.
Net revenue for the three-month period ended Sept. 30, 2021, was CA$15.2 million, up 16% compared to the same period one year earlier but slightly lower than the previous quarter.
Delta 9’s shares are traded on the Toronto Stock Exchange as DN.