MariMed Inc. (CSE: MRMD) (OTCQX: MRMD) closed on a 10-year $58.7 million loan with Needham Bank, a Massachusetts-based community bank.
The money from the loan will first be used to pay off existing loans and potentially buy some assets, the company said. Any leftover money will be used to expand a cultivation facility in Maryland. Unused funds after the project will be returned to MariMed.
According to filings, for the first five years, the interest rate is 8.43%. After that, it will change to a rate based on the Federal Home Loan Bank of Boston’s rates plus 3.50%. The company will make interest-only payments for the first 12 months, followed by payments based on a 20-year amortization schedule.
MariMed CEO Jon Levine said that the loan would help “generate significant cash savings” for the company.
“Securing a lower rate, when interest rates continue to rise, is the result of the financial discipline we have displayed over the past decade,” he said in a statement Monday. “Importantly, we are pleased there is no warrant or other equity component resulting in dilution to our shareholders.”
The 10-year, $58.7 million construction-to-permanent-commercial real estate mortgage loan is secured against MariMed’s assets and properties in Maryland and Massachusetts.
The CEO projected savings of $4.7 million in principal and interest in the first year and $3.5 million annually for the next four years. The savings will help improve the company’s cash flow, potentially opening more opportunities for mergers and acquisitions.
“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,” Levine said.
The move comes at a time when interest rates are generally on the rise, especially for federally caged cannabis companies. The lender reportedly filed an initial public offering to go public, with a “future sale or or merger” in its realm of possibilities, the Needham Observer reported. The bank had been looking to raise $390 million.
Levine added, “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.”