Cannabis Investing: Debt vs Equity

<p>There&rsquo;s been a significant shift in cannabis debt issuance, transitioning from equity-linked debt to straight debt. This shift reflects the industry&#39;s growing maturity and profitability (at least in the U.S.)</p> <p></p> <p>In early 2018, nearly all cannabis debt issues were convertibles, and many issues had additional attached warrants to achieve total coverages of over 100%.</p> <p></p> <p>As the U.S. MSOs became EBITDA positive in 2020, issuance of straight coupon debt began in earnest, led by the $300M Curaleaf deal in December 2020 and followed shortly after that by $100M and $120M deals by Cresco and TerrAscend, respectively.</p> <p></p> <p>Most of the top MSOs, including Ascend, AYR, Cresco, Curaleaf, Jushi, TerrAscend, Trulieve, and Verano, have now completed straight coupon issues in $100M+ sizes at rates between 8% and 10%.</p> <p></p> <p>The ability of Acreage Holdings and Glass House Brands to issue debt with no or little equity linkage is somewhat more surprising but explainable.</p> <p></p> <p>The key is that in a credit market starving for yield, the Glass House issue is priced at 890 basis points over U.S. Treasuries. Investors are being paid a sizable premium for taking cannabis risks, believed to be on par with a CCC rated bond.</p> <p></p> <p>Episode 863 The #TalkingHedge looks at Viridian Capital Advisors chart...</p> <p><a href="https://youtu.be/XysKOUGX-so">https://youtu.be/XysKOUGX-so</a></p> <p>#AlternativeInvestors #CannabisIndustry #AngelInvestors #FamilyOffices #HighNetWorthInvestors #WealthManagers #PrivateBankers #FinancialAdvisors #PrivateEquity #VentureCapital #AssetManagers #fundmanagement #cannabisinvesting #limitedpartners #Cannabis #CBD #VC #Capital #InvestmentBanking #cannabisBusiness #Investing #AltFinance</p>