Longtime backers Stable Road Capital and Gotham Green Partners provided approximately $10.7 million and $5 million, respectively, through increases to their existing loan facilities. An unnamed group of institutional lenders supplied a new loan facility containing the remaining $10 million.
The additional Stable Road funds will come with an 18% annual interest rate, while the new $10 million facility will accrue 7.5% interest annually. The Gotham Green capital infusion is part of a more complex arrangement under an existing convertible debt facility with interest rates of LIBOR plus 6% — or 6% above the rate major global banks charge to lend to each other.
The new funding is up roughly 25% from when the company first revealed the incremental loans in September, driven by an approximate doubling of Stable Road’s commitment.
“We are pleased with the continued support from our existing capital partners as we continue our recent track record of execution,” MedMen Executive Chairman Ben Rose said in a statement.
“The financing package is a significant milestone for the company and is a reflection of the commitment the company has made to strengthen the balance sheet, accelerate its path to profitability and sustainability, and focus on its core retail business. We look forward to continue expanding the MedMen brand,” he added.
Stable Roads, a Venice-based family office, and Gotham Green, a Santa Monica-based private equity firm, have lent millions of dollars to MedMen in recent years. Gotham Green, in particular, has led investments worth roughly $150 million into MedMen.
The company has turned to such cash infusions, alongside asset and stock sales, to counter significant losses over the last year. These have included selloffs of unprofitable retail dispensaries and operating licenses, issuances of new dilutive shares and aggressive cost-cutting measures such as laying off more than 40% of its staff.
The company reported a roughly $247 million net loss attributable to shareholders on $157 million in revenue for its fiscal 2020 ended June 27. Its share price was 13 cents on Nov. 4, down roughly 89% since the same time last year.
MedMen had roughly $536 million of debt, including loan facilities and operating and lease liabilities at the end of its fiscal year on June 27.
Despite the series of negative developments over the last year, some analysts remained cautiously optimistic that the company might be on an upswing.
Vivien Azer, an analyst with Cowen Inc., pointed to the ongoing willingness of MedMen’s creditors to fund the company as an encouraging lifeline.
“(MedMen) is unique in driving brand equity within the emerging cannabis market, given their dominant position in California,” Azer wrote in a report. “The company is refocusing its efforts on its core assets and is restructuring its cost base in an effort to generate improved operating leverage following a history of meaningful adjusted EBITDA losses. (MedMen’s) retail-oriented strategy is underpinned by prime locations and stylish dispensaries.”
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