Heritage Cannabis Holdings Corp. and its subsidiaries have sought and obtained an order for creditor protection from the Ontario Superior Court of Justice pursuant to the Companies’ Creditors Arrangement Act (CCAA).
The company behind a handful of cannabis brands like RAD, Purefarma, Premium 5, Pura Vida, Dank Drops, and others says the decision to commence CCAA proceedings was a difficult one, made after careful consideration of the company’s financial position, while evaluating all available alternatives and engaging in significant consultation with legal and financial advisers.
The decision was also informed by Heritage’s senior secured lender, BJK Holdings Ltd., with an April 1 demand for payment in full of certain indebtedness owing by the Heritage group to the lender in the amount of $8.4 million.
Heritage announced in October 2023 that it had entered into binding agreements to sell its real estate properties in Ontario and British Columbia (the former Cannacure and Voyage Cannabis locations) to BJK Developments Ltd. for a net purchase price of $9.7 million and lease the Ontario and BC Property back from the Purchaser.
The purchase price was to be used to offset the amount Heritage owed BJK Holdings, reducing the Company’s remaining term debt by approximately 64% to just under $5.3 million. Heritage last updated the terms of its $7 million loan from BJK in October 2021, increasing it to $7.175 million, and extending the maturity date from September 29, 2022, to February 1, 2023.
Under the newest deal, the remaining term financing, as amended within a third amending agreement, has been extended to January 31, 2025, with interest calculated at the Royal Bank of Canada prime lending rate minus 1.75%. In addition, the Company retains its revolving line of credit of up to $5 million with BJK, which has also been extended until January 31, 2025.
The initial order for creditor protection for Heritage includes, among other things, a stay of proceedings in favour of the company and its Canadian subsidiaries; and the appointment of KPMG Inc. as monitor of the company. The initial order also extends the stay of proceedings to certain US affiliates of the company which are not applicants in the CCAA proceedings.
The board of directors of Heritage will remain in place, and management will remain responsible for the company’s day-to-day operations under the monitor’s general oversight.
Heritage Cannabis also says it plans to seek approval of a sale and investment solicitation process. If approved, this would allow interested parties to participate in the process in accordance with the Sale and Investment Solicitation Process (SISP) procedures. Additional details regarding the SISP will be disclosed in due course.
Heritage says they expect that the Canadian Securities Exchange (CSE) will place the company under delisting review and that there can be no assurance as to the outcome of such review or the continued qualification for listing on the CSE.
In February 2024, Heritage Cannabis released its Q4 2023 and year-end financial results, with $11,409,434 in gross revenue for the three months ending October 31, 2023, and a comprehensive loss of $14,123,548. Its loss for 2023 was $19,906,411, down from a loss of $23,937,773 in 2022.
“Remaining true to our vision of sustainable growth, Heritage continued to optimize our products in 2023 while maintaining a close focus on production efficiencies, operational spending, and high gross margin sales, all of which were key in achieving growth in gross margin of over 50% for the year and 628% for the quarter compared to last year, showing a very promising trend for the start of this year,” said David Schwede, CEO of Heritage at the time of its year-end financials.
Featured image of Heritage Cannabis West Corporation, Heritage’s British Columbia site.
