Fitch Downgrades Canopy Growth As Distressed Debt

After the market closed on Wednesday, Fitch Ratings downgraded the Long-Term Issuer Default Ratings (IDR) for Canopy Growth Corporation (NASDAQ: CGC) and 11065220 Canada Inc. to ‘RD’ from ‘C’ on the completion of Canopy’s exchange offer for a portion of the convertible notes due July 2023. This means Fitch considers it a distressed debt situation.

Fitch said it has reassessed and upgraded the IDRs to ‘CCC’ post completion of the exchange. Fitch has also affirmed the ‘B’/’RR1’ratings for the senior secured term loan facility at Canopy and the co-issuer, 11065220 Canada, Inc.

The statement said, “The post-exchange IDR of ‘CCC’ reflects Canopy’s ongoing operational risks with executing its operating strategies, the high cash burn rates and the uncertain path to profitability that has reduced liquidity. The exchange only partially addresses the 2023 maturity, with C$337 million remaining outstanding of which Constellation Brands, Inc. (NYSE: STZ) continues to hold C$100 million.”

It went on to say, “As such, Fitch could take further negative rating actions if Canopy pursues a repayment/refinancing of the remaining 2023 notes that Fitch considers a distress debt exchange per criteria, a lack of execution on the premiumization cultivation strategy, or if Fitch views that the strategic incentive for CBI to support Canopy has lessened. The current rating incorporates a one-notch uplift from the standalone credit profile (SCP) at ‘CCC-‘.”

Underperformance

2021 Canadian cannabis retail sales grew by around 50% to C$4 billion, according to Statistics Canada. However, Canopy materially underperformed Fitch’s and the company’s own expectations of growth in line with or better than the market, with revenues in the Canadian cannabis channel decreasing by 10% in fiscal 2022 to C$258 million. Canopy lost share, in part, due to its pivot away from the value segment.

Fitch noted that marketplace dynamics are challenging, including evolving consumer preferences, and the competitive environment with significant pricing compression, particularly in the value segment has caused material profitability pressures. Consequently, Canopy has recognized significant asset impairments.

2 comments

  • michael g mclaughlin

    July 25, 2022 at 2:25 pm

    Maybe, just maybe, GOING BIG in the cannabis business, especially taking on millions in debt is NOT the future. People in the US and Canada cnnot grasp a business that starts small (reasonable) and grows. Walmart did not start big. But modern businesses are so intoxicated with $. There is no doubt the cannabis busineess will start to shake out—BKs and mergers and failures on the horizon. That is the way of capitalism. Amen.

    Reply

  • StudyEssay

    August 11, 2022 at 6:30 am

    More businesses will interact with visitors through their content in 2022. Start brainstorming topic ideas if you don’t have a solid content marketing strategy. Begin by engaging with your audience on social media and examining your on-site metrics.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Choose Your News

Subscribe to the Green Market Report newsletter that gives you original content delivered straight to your inbox.

 Subscribe

We respect your privacy. See our privacy policy.


About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


READ MORE



Recent Tweets

@GreenMarketRpt – 7 hours

Schwazze Ekes Out On Revenue Despite ‘Challenging’ Colorado Market

@GreenMarketRpt – 9 hours

Don’t procrastinate! Get ready for the GMR Tech Summit happening Sept. 8, 2022 in San Francisco. Amazing lineup and…

@GreenMarketRpt – 9 hours

Today is the last day to nominate a company for the GMR Tech Awards. Judging begins soon and we nee…

Back to Top

Choose Your News

Subscribe to the Green Market Report newsletter that gives you original content delivered straight to your inbox.

 Subscribe

We respect your privacy. See our privacy policy.