Medmen Modifies Debt Facilities, Lease Terms To Improve Near Term Liquidity

MedMen Enterprises (CSE: MMEN) this morning announced that it has amended several of its outstanding credit facilities as a means of improving its financial situation. Primarily, the amendments consist of reduced up front payments on both its leases as well as reduced interest payments on several outstanding debt facilities.

The modifications relate to several outstanding facilities with various lenders, and are summarized as follows.

March 30, 2020 senior secured convertible facility with Gotham Green Partners:

• All notes under the facility maintain interest rates, however 100% of the interest due prior to June 2021 will be paid in kind, and 50% of the interest for the term thereafter will be paid in kind. In short, this means the company will see the interest added to the principal of the outstanding facility.
• Minimum liquidity requirements have been waived until September 30, after which it decreases to US$5.0 million. On March 31, 2021 it will increase to US$7.5 million, followed by another increase to US$15 million on December 31, 2021.
• The company will be selling additional non-core assets, including an undisclosed retail license which sold for US$10 million on July 2, 2020. Further details were not provided.
• The conversion price of 52% of the currently outstanding US$167.7 million was amended to US$0.34 per share.
• Amendment fee of US$2.0 million added to the principal, with a conversion price of US$0.28, along with additional covenants being added to the debt.

January 14, 2020 Stable Road Capital debt:

• Interest on the US$77.7 million senior secured debt will be paid in kind 100% until June 2021. 50% of interest thereafter will be paid in kind.
• Minimum liquidity terms are now in line with the terms on the GGP debt.
• Amendment fee of US$834,000 paid in kind, along with 20.2 million warrants effectively seeing the conversion price reduced from US$0.60 per share to US$0.34.

Treehouse Real Estate Investment Trust leased property:

• Undisclosed portions of rent on 14 properties will be deferred between July 1, 2020 and July 1, 2023. Deferred rent to have interest of 8.6% per annum.
• 3.5 million warrants with a conversion price of US$0.34 and an expiry of 5 years have been issued in conjunction with the amendments to leases.
• The company will also pursue cultivation partners at Desert Hot Spring and Mustang facilities so as to be able to focus solely on retail operations.

In total, the modifications with all lenders will enable Medmen to effectively defer US$32 million in cash commitments over the next 12 months, in exchange for more liquidity in the interim. However, investors will be quick to note that it will also increase the firms capital requirements on a longer term basis, while the company continues to see its debt obligations grow.

Medmen Enterprises last traded at $0.33 on the CSE.

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Information for this briefing was found via Sedar and MedMen Enterprises. The author has no affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.