Cresco Labs (CSE: CL) (OTCQX: CRLBF) announced it has entered into a credit agreement for a senior secured term loan for an initial amount of up to $100 million, with a mutual option to increase the size of the facility to a maximum of $200 million. Cresco said it expects to complete an initial drawdown of up to $100 million on or about January 30, 2020. The stock was recently trading at $6.32, above its year low of $4.47, but below the 52-week high of $14.39.
“This agreement reflects the strength and growth potential of the national platform Cresco has built as well as our ongoing commitment to execute a superior capital agenda for the benefit of shareholders,” said Charlie Bachtell, CEO, and Co-founder of Cresco Labs. “Through this deal, we have diversified the Company’s funding sources, improved our cost of capital in a non-dilutive manner and given ourselves flexibility in a dynamic capital environment. As we enter 2020 and our business continues to increase its positive free cash flow, Cresco is well-positioned to continue growing its foothold in the most strategic cannabis markets in the U.S., while building the most important company in the industry.”
The company said that the proceeds from the Senior Loan will be used to fund the expansion of operations in Illinois, closing and integration costs associated with pending acquisitions, and other strategic growth initiatives in key markets.
Balance Sheet Moves
Over the last quarter, the company has been making moves to strengthen its finances through a number of deals. In December, the company said it would sell its Lincoln, Illinois cultivation facility to GreenAcreage Real Estate Corp. (GreenAcreage), for $50 million. In November, Cresco announced a sale-and-leaseback agreement for its Marshall, Michigan and Yellow Springs, Ohio facilities, which totals $38 million. Cresco was also forced to amend its $800 million merger with Origin House, due to a combination of market forces and falling stock prices. After making some changes to the merger, which included an Origin House equity financing worth around $30 million, the value of the deal fell to roughly $416 million.
The legal adult cannabis sales in Illinois have gotten off to a very strong start with almost $11 million in sales in the first week alone. Cresco Labs said on the first day it had served 3,145 people at its five Sunnyside Dispensaries located in Lakeview, Elmwood Park, Champaign, Buffalo Grove, and Rockford, Illinois. They sold 9,258 cannabis products, including Cresco’s house of brands and items from other Illinois suppliers, with the average ticket price being $135.
According to the company statement, members of the management and board of directors will also be participating as investors in the Senior Loan. Each commitment under the Senior Loan may be for an 18-month or 24-month term, at the lender’s option. Loans made on the initial closing date will bear interest at a rate of approximately 12.7% per annum for 18-month loans and approximately 13.2% for 24-month loans, payable quarterly in arrears. The terms of the Senior Loan were negotiated at arm’s length with the agent and lead investor and include customary restrictive covenants.