MariMed, a multi-state cannabis operator, yesterday announced that it closed a $58.7 million secured credit facility with a U.S. chartered bank on November 17, 2023.
"I am delighted to announce the closing of this debt refinancing, which will generate significant cash savings," said Jon Levine, MariMed’s CEO. "Securing a lower rate, when interest rates continue to rise, is the result of the financial discipline we have displayed over the past decade. Importantly, we are pleased there is no warrant or other equity component resulting in dilution to our shareholders."
Levine continued, "By paying off the Chicago Atlantic loan, we were also able to unencumber our operating assets in Illinois, Ohio and Delaware, as well as our branded products, providing additional levers for future term loans at attractive rates if we choose. Additionally, the credit facility bolsters our ability to continue executing our strategic plan, particularly as it relates to growing the Company through mergers and acquisitions. There are many attractive opportunities for accretive deals to be made in our industry, and we intend to explore any that will increase shareholder value."
The loan is a 10-year, $58.7 million Construction to Permanent Commercial Real Estate Mortgage (CREM) loan with interest at a lower fixed rate. After the first five years, the rate will be reset for the remaining five years.
The company has interest-only payments for the first 12 months. After the first 12 months, payments will be based on a 20-year amortization schedule.
The loan is secured solely by MariMed's Maryland and Massachusetts operating assets and real estate holdings. The company’s other operating assets and key brands, like Betty’s Eddies and Nature’s Heritage are now unencumbered with the payoff of the Chicago Atlantic term loan.
The terms of the transaction do not include warrants or other equity or dilutive instruments.
MariMed used the proceeds to pay off existing term loans with Chicago Atlantic and Bank of New England and a sellers note from the Ermont acquisition, which in the aggregate totaled approximately $46.8 million.
The remaining funds will be held in escrow by the lender to complete the expansion of the company’s Hagerstown, Maryland cultivation facility.
Any unused proceeds will be released to MariMed after completion of the cultivation facility expansion.
“The principal and interest savings of $4.7 million in the first year, and $3.5 million a year for the four years thereafter, will significantly improve cash flow from operations going forward, and provide funds that can be used for acquisitions if we choose,” said Levine. “Including this facility, our lower blended interest rate and new debt facility represent a Debt/EBITDA ratio of 2.5X, which is among the lowest in the cannabis industry and speak to our ability to generate significant positive cash flow from operations.”