Cannabis MSO lands in receivership over $210 million debt to lender

This story has been updated to add further comment from TerrAscend.

Less than a year after announcing its plans for a “strategic exit” from Michigan’s low-margin market, cannabis multistate operator TerrAscend is in receivership in the state over an outstanding $210 million debt to one of its lenders.

The court-ordered receivership comes as the lender, New York-based FocusGrowth Asset Management, seeks to protect TerrAscend’s remaining Michigan assets from lawsuits filed by vendors seeking to recover unpaid bills, according to Crain’s Detroit Business.

The receivership is an attempt by FocusGrowth to ensure it gets paid before TerrAscend’s erstwhile vendors.

Although at least one publicly traded cannabis MSO in Canada, like TerrAscend, was approved for Chapter 15 bankruptcy protections in the U.S., the most common method for lenders to recover value from an underwater cannabis company is still receivership.

Why is cannabis MSO TerrAscend in receivership in Michigan?

FocusGrowth moved for receivership after TerrAscend failed to resolve the local vendor lawsuits by a May 1 deadline, Crain’s reported.

“The litigations compromise FG’s interest in the Michigan entities’ remaining assets, which are its collateral,” the lawsuit reads in part, according to Crain’s.

In its most recent earnings statement May 7, TerrAscend reported $6.8 million in outstanding accounts payable and lease liabilities in Michigan, compared to $5.2 million worth of assets.

A May 6 order in the Oakland County Circuit Court appointed Charles Bullock of Stevenson and Bullock as the receiver, according to TerrAscend’s filings.

“The Receiver will have broad powers and authority to take possession of, and protect and preserve, all of the assets of the Michigan Receivership Entities, and administer the estate in accordance with applicable State of Michigan law, including the orderly and efficient liquidation thereof,” the filings read.

In a statement shared with MJBizDaily after this story was initially published, a TerrAscend spokesperson said “the receivership process… is in furtherance of the strategic exit” announced last year.

“The process is limited to TerrAscend’s Michigan entities and does not impact the company’s broader operations or performance,” the statement added in part.

“TerrAscend remains focused on executing its growth strategy across its core markets.”

What’s the latest with cannabis MSO TerrAscend?

The Michigan receivership is the latest complication for New Jersey-based TerrAscend.

Earlier this week, the federal Justice Department sued the MSO in federal court in New Jersey over an $8.3 million 280E tax refund the feds are attempting to claw back.

Last summer, TerrAscend made the decision to sell real estate and licenses for 20 stores and four cultivation facilities and exit Michigan, which company Executive Chair Jason Wild called “an extremely difficult market.”

That came just a couple of years after a Michigan acquisition spree that saw the company pay $28.5 million for a six-store chain – and pay $545 million in stock for Gage Cannabis.

Last fall, TerrAscend announced the sale of three former Gage Cannabis locations but still has several assets in the state, according to Crain’s.

There are three outstanding lawsuits against TerrAscend in Michigan from vendors, with another in arbitration, Crain’s reported.

One, Redemption Cannabis, an operator that received a marijuana social-equity grant, told Crain’s that TerrAscend owes its cultivation operation $249,000.