SunStream Bancorp is pleased to announce a receivership court order granting the sale of certain assets of Greenpeak Industries and certain affiliated entities d.b.a. Skymint to Skymint Acquisition Co., a newly formed designee entity of Tropics LP. Tropics is a limited partnership fully owned by an affiliate of Sunstream, a joint venture sponsored by SNDL Inc.
Skymint Acquisition Co. is anticipated to be part of the Sunstream USA group of companies, a U.S. platform with one or more independent third-party investors which will be independently managed and governed. Today's announcement follows a recent SNDL press release relating to acquiring the assets of Surterra Holdings Inc. d.b.a. Parallel that more fully describes the proposed structure of the Sunstream USA group of companies.
On March 3, 2023, Tropics applied for and received from the circuit court for Ingham County, Michigan, the appointment of a receiver of the assets of Skymint. The court appointed receiver, Trust Street Advisors, conducted an auction process for the assets of Skymint.
Skymint Acquisition Co. served as the staking horse bidder and was ultimately selected as the successful bidder. On October 12, 2023, the sale order approving the transfer of the Skymint assets to Skymint Acquisition Co. was approved. The final closing is expected in the first quarter of 2024 and is subject to closing conditions outlined in the asset purchase agreement, which includes obtaining regulatory approval by the Cannabis Regulatory Agency in Michigan, as well as various local municipalities.
As of the date the sale order was entered, the asset purchase agreement provided for the purchase or assumption of 21 retail leases with dispensaries that produced annualized sales of approximately $68 million in September 2023. Also being purchased or assumed are cultivation and equipment leases required for continuing operations.
As part of the receivership process, uneconomic cultivation, equipment and retail leases representing more than $12 million of annual fixed obligations were rejected and will not be purchased or assumed by Skymint Acquisition Co.
Regulatory approvals for the Skymint Transaction are anticipated to commence in the first quarter of 2024, and to continue on a rolling basis.
In September 2021, Tropics loaned $70 million to Skymint. The Skymint loan is secured by a first-priority lien on substantially all of the assets of Skymint. At the time the parties consummated the loan, Skymint also announced the acquisition of substantially all of the assets of 3Fifteen, a Michigan-based cannabis business. Concurrently, Skymint was also in the process of raising equity capital that would support the combined company's future liquidity and general working capital requirements.
However, by March 2022, Skymint was in default under the loan. On May 3, 2022, Skymint and Tropics entered into a first amendment of the loan, intended to bridge Skymint with working capital to better position itself to raise additional capital. Pursuant to the first amendment, Tropics waived the initial defaults and loaned an additional $5 million to Skymint. Tropics also agreed to various concessions regarding certain financial covenants to allow Skymint to comply with the waiver of the initial defaults.
After the first amendment, Skymint's financial position and business did not improve. Skymint did not comply with the amended financial covenants and failed to raise any additional capital. On June 10, 2022, Tropics formally notified Skymint that additional events of defaults existed under the loan documents. Throughout the second half of 2022, Tropics and Skymint attempted to negotiate a means to improve Skymint's financial position, but Skymint's financial outlook continued to worsen.
At the beginning of the fourth quarter of 2022, Skymint was failing to pay certain obligations, which threatened its ability to continue operating its business. As a result, Tropics provided additional capital to Skymint to help it maintain business operations. On November 14, 2022, Tropics and Skymint entered into a forbearance agreement, pursuant to which Tropics agreed to conditionally forbear exercising certain default remedies. In addition, Tropics loaned an incremental $6.25 million to Skymint.
In the first quarter of 2023, amid Tropics and Skymint working towards a restructuring of Skymint's debt, it became clear to stakeholders that a consensual receivership was necessary. As of February 2023, Skymint had senior debt obligations of more than $125 million and lease obligations of more than $130 million.
On March 3, 2023, Tropics filed a verified complaint against Skymint, seeking, among other relief, the appointment of a receiver over the assets of Skymint. That same day, the court appointed Gene Kohut of Trust Street Advisors as a receiver of the Skymint assets. Under Michigan law and the order appointing receiver, the receiver was permitted to marshal Skymint's assets, oversee its day-to-day operations, assume and reject executory contracts, pursue and defend litigation on behalf of Skymint, and market the assets of Skymint for sale.
The receiver subsequently started a process to sell Skymint's assets, which included assuming beneficial executory contracts and leases and rejecting those not deemed in the best interest to retain on behalf of Skymint. As part of the sale process, Tropics successfully credit bid its debt for the purchase of Skymint's assets, which resulted in the court granting the sales order. In turn, Skymint Acquisition Co. anticipates concluding the asset purchase agreement with Skymint and intends to seek regulatory approval to transfer the relevant cannabis licenses.
