In a sign of confidence, Aurora Cannabis Inc. (ACBFF) has agreed to a new C$200 million debt facility, with a potential increase to C$250 million, with the Bank of Montreal. The debt will consist of a $150 million term loan and a $50 million revolving credit facility both of which will mature in 2021.
The debt will be primarily secured by Aurora’s production facilities, including Aurora Sky, Aurora Mountain, and Aurora Vie. Aurora Sky is projected to produce in excess of 100,000 kg per year of high-quality cannabis at low per gram costs and is scheduled to deliver its first harvest this week.
“Having successfully met all of BMO’s stringent risk assessment and other due diligence criteria to establish this facility reflects well on the maturity, progress, and prospects of Aurora, as well as the quality and economic value of our production facilities,” said Terry Booth, CEO. “This is by far the largest traditional debt facility in the cannabis industry to date. The funds provide us additional fuel to complement our end-to-end portfolio of vertically integrated, geographically and horizontally diversified assets, aimed at building a pre-eminent global cannabis company with a superior margin profile.”
Glen Ibbott, CFO of Aurora, added, “The shift to traditional debt financing is significant. Our cost of capital continues to decrease, providing us a distinct competitive advantage as we execute on our growth strategy. The non-dilutive nature and attractive pricing are consistent with Aurora’s commitment to generating shareholder value. We believe this is a major milestone in the cannabis industry and a validation of our operational effectiveness. It also marks an exciting new stage of our long-term relationship with BMO, a Tier 1 bank with a sterling domestic and international reputation.”
Canada’s lawmakers recently gave the final approval for the legislation to legalize adult-use marijuana with first sales set for October 17, 2018. According to the statement, Aurora may request an increase of up to a further $45 million to the term loan subject to agreement by BMO and satisfaction of certain legal and business conditions. BMO will also be providing up to $5 million in other credit instruments. The loans can be repaid without penalty at Aurora’s discretion. Based on the current BMO CAD Prime Rate, the interest payable is expected to be in the mid to high 4% per annum range over the term of the loans.
Aurora stock was lately trading at $7.29 on the OTC Markets, down from its 52-week high of $12.30, but above the year’s low of $1.60. The company has been on an acquisition binge having acquired nine companies and signing numerous partnerships.