WeedMD Inc (TSXV: WMD) announced this morning that it has signed an amendment to its outstanding $39 million credit facility with the Bank of Montreal. The facility was original signed in March 2019, and utilized to enable the firm to exercise its option to acquire its Strathroy, Ontario facility in full.
The agreement, which has a maturity of 2022, has seen certain undisclosed financial covenants deferred by twelve months to that of June 30, 2021, giving the company greater financial flexibility. Further, repayments of the principal have been further delayed, with the repayments now not commencing until the first quarter of 2021, with payments to occur on a quarterly basis.
While a positive in the near term, the larger payments may cause stress on WeedMD’s balance sheet once repayments begin, with it being estimated that only five payments will now occur, thus ballooning the size of each individual payment. In this regard, the company will also be fighting an interest rate that is now 50 basis points higher as a result of the of amendments. Previously, the rate of interest was said to “average in the low to high 5% per annum range over the three year term.”
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The credit facility itself consists of a $33.1 million term loan, a $3.0 million equipment term loan, and a revolving credit facility of $3.0 million.
WeedMD last traded at $0.48 on the TSX Venture.
Information for this analysis was found via Sedar, and WeedMD Inc. The author has no securities related to this organization. WeedMD Inc was previously a client of CanaCom Group, the parent company of The Deep Dive. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.
