Our summaries of recent Canadian insolvency filings.
March 22, 2021
Hydrx Farms Ltd., a vertically integrated Health Canada-licensed cannabis company with a facility in Whitby, Ontario, obtained protection under the CCAA on March 22 on application by Domenico Serafino. In August 2017, the company financed its operations through the issuance of a convertible debenture from Aphria Inc. for $11.5 million and raising approximately $86.0 million in an equity financing. To date, the company has accumulated losses in excess of $55.0 million and its operations have been shut down due to liquidity problems. All of the company's employees have been laid off and only a few consultants remain with the company in order to maintain the company's license with Health Canada. In addition to the company's financial issues, it is the subject of six legal proceedings. Schwartz Levitsky Feldman Inc. was appointed monitor. Counsel is Paliare Roland for the monitor and Minden Gross for the applicant.
FIGR Brands, Inc., FIGR Norfolk Inc., and Canada’s Island Garden Inc. (collectively, the “FIGR Group”)
January 21, 2021
FIGR Brands, Inc., FIGR Norfolk Inc., and Canada's Island Garden Inc. (collectively, the "FIGR Group"), a vertically integrated cannabis business which operates two cannabis facilities (one in Ontario and the other in PEI), filed for protection under the CCAA on January 21, listing approximately $203.4 million in liabilities and $153.2 million in assets. Since commencing operations, the FIGR Group has been cash flow negative and relies on funding from indirect subsidiaries of New Pyxus International ("New Pyxus"), which is the parent company of FIGR Brands, Inc. Alliance One International Tabak C.V. ("AOI Tabak"), one of the New Pyxus' indirect subsidiaries, is owed approximately $189.7 million and is no longer prepared to continue funding the FIGR Group. During these CCAA proceedings, the FIGR Group will be receiving up to $8.0 million in DIP financing from Alliance One Tobacco Canada Inc. FTI Consulting was appointed monitor. Counsel is Bennett Jones for the FIGR Group, Cassels for the monitor, and Chaitons for Alliance One Tobacco Canada Inc.
October 19, 2020
Sunniva Inc. (CNE: SNN), a Vancouver, British Columbia-based development stage business that has been developing facilities for the cultivation, processing, and distribution of raw cannabis flower and cannabis-based products — along with its subsidiaries — obtained protection under the CCAA on October 9. The company's financial distress is caused primarily by cost overruns and construction delays regarding its primary business asset, a leasehold interest in an under-construction cannabis cultivation facility in California. In November 2018, the company announced its strategic decision to focus corporate resources on developing the company's business in California and began liquidating its Canadian assets. The company and its subsidiaries intend to liquidate what remains of their Canadian assets and advance the business in California. On June 22, the British Columbia Securities Commission and Ontario Securities Commission each issued a cease trade order in respect of the company's shares. The company, which has unsecured debts in excess of $58.0 million, is currently seeking an extension of the stay period so that the relief will continue until November 27. Alvarez & Marsal was appointed monitor. Counsel is BLG for the companies and Cassels Brock for the monitor.
September 15, 2020
PharmHouse Inc., a licensed cannabis producer with an operating facility in Staples, Ontario, obtained protection under the CCAA on September 15, listing approximately $170.9 million in liabilities and $187.7 million in assets. Since August, the company has relied on $1.2 million in funding from Canopy Rivers Corporation ("Rivers") to meet its immediate cash needs. In order to establish its operating facility, increase its cannabis production capabilities, and grow its business, the company has expended significant resources to date, including funds from equity and debt financing. As a result, the company has now exhausted its cash on hand, including its $90.0 million non-revolving credit facility. Absent urgent additional funding and a restructuring of its business, the company will face an immediate cessation of its operations. Although Rivers has advised that it is no longer willing to provide the company with funding on an unsecured basis, it will be providing DIP financing during the CCAA proceedings. EY was appointed monitor. Counsel is Bennett Jones for the company, BLG for the monitor, and Cassels Brock for Rivers.
June 5, 2020
Beleave Inc. (CSE:BE, OTCQX:BLEVF), a licensed producer and seller of cannabis and cannabis related products, along with certain affiliates (collectively, the "Beleave Group"), obtained protection under the CCAA on June 5, listing over $18.0 million in liabilities. The Beleave Group, which sells to five Canadian provinces, has experienced negative cash flow since its inception. In particular, it spent significant resources to construct and expand the processing capacity at its production facility in Hamilton, Ontario. Although the Beleave Group has pursued a number of strategic initiatives to improve its financial position, certain of these initiatives have been unsuccessful, including efforts to sell its cannabis licence. Unless CCAA proceedings are implemented, the Beleave Group will not be able to continue operating. The Beleave Group intends to commence a stalking horse sale process in order to sell its assets and operations for the benefit of its creditors and other stakeholders. Grant Thornton was appointed monitor. Counsel is Miller Thomson for the Beleave Group and Fasken for the monitor.
Green Growth Brands Inc., GGB Canada Inc., Green Growth Brands Realty Ltd. and Xanthic Biopharma Limited (collectively, the “GGB Group”) (GGB:CNX),
May 20, 2020
Green Growth Brands Inc., GGB Canada Inc., Green Growth Brands Realty Ltd. and Xanthic Biopharma Limited (collectively, the "GGB Group") (GGB:CNX), a cannabis enterprise that is licensed to grow, process and sell cannabis in various US jurisdictions, obtained protection under the CCAA on May 20, listing over $100.0 million (USD) in liabilities. The GGB Group, which was funded through equity and debt, has always been cash flow negative. Commencing in early 2019, the Group began to experience liquidity issues. These problems were compounded by the COVID-19 pandemic, and the GGB Group was forced to indefinitely suspend its business selling CBD-infused consumer products. All Js Greenspace, one of GGB Group's existing secured lenders, will be providing up to $7.2 million (USD) in DIP funding during these CCAA proceedings. EY was appointed monitor. Counsel is Stikeman Elliott for the companies, Osler for the monitor, and McMillan for All Js Greenspace.
April 1, 2020
James E. Wagner Cultivation Corporation (TSX:JWCA), a Kitchener, Ontario-based licensed cannabis producer focused on producing clean cannabis using a proprietary aeroponic platform called GrowthSTORM, obtained protection under the CCAA on April 1, listing approximately $41.0 million in liabilities. Since its inception, the company has been cash flow negative and has relied on equity and debt financing for funding. The company now requires additional funding after it expended significant resources to expand its cannabis production and processing capacity as part of a strategy to achieve profitability. During the CCAA proceedings, Trichome Financial will be providing DIP financing. KSV was appointed monitor. Counsel is Davies for the monitor, Torys for Trichome, Bennett Jones as the company's insolvency counsel and DLA Piper as the company's corporate counsel.
March 31, 2020
CannTrust Holdings (TSX:TRST), a cannabis producer in Canada with production and processing facilities in Fenwick and Vaughan, Ontario, along with its subsidiaries CannTrust, CTI Holdings (Osoyoos) and Elmcliffe Investments, obtained protection under the CCAA on March 31. Following regulatory audits of the company's facilities in June and July 2019, Health Canada determined that the company was growing and storing cannabis contrary to applicable laws. Subsequently, Health Canada suspended the company's licences so that it can no longer propagate new batches of cannabis. Multiple putative securities class actions were also commenced in Canada and the US against the company, seeking aggregate damages of at least $500.0 million. Despite efforts to address Health Canada's findings and concerns by implementing a remediation plan, the company has had no revenue since July 2019 and recent global developments - including an oil price shock and the COVID-19 pandemic - have made it even more difficult for the company to attract new financing or strategic partners. EY was appointed monitor. FTI is the Chief Restructuring Officer of the companies. Counsel is McCarthy Tétrault for the companies, Aird & Berlis for the monitor, and Goldman, Spring, Kichler & Sanders for CannTrust Holdings.
March 19, 2020
Pure Global Cannabis (TSXV:PURE), which is engaged in the production and sale of cannabis products in Canada with its subsidiaries (collectively, "Pure Global Group"), obtained protection under the CCAA on March 19. Pure Global Group's primary assets are two real properties in Brampton, Ontario owned by its subsidiaries, 237A Advance and 237B Advance, on which the group's production and warehouse facilities are located (the "Brampton Properties"). In 2018, the company and its primary operating subsidiary, PureSine, issued secured debentures and entered into a collateral agency agreement with Cancor Debt Agency. A year later, the group's precarious liquidity situation caused it to miss a payment that was due under the debentures that the company had issued to certain debenture holders. The group also defaulted on its vendor take back-mortgages for the Brampton Properties. Without a stay of proceedings and interim financing, Pure Global Group will face a complete cessation of its operations. During the CCAA proceedings, Hillmount Capital will be providing DIP financing. EY was appointed monitor. Counsel is Weisz Fell Kour for the company, Osler for the monitor, Cassels for 2056706 Ontario in respect to 237A Advance, Keyser Mason Ball for Kozo Holdings in respect to 237B Advance, Chaitons for Cancor Debt Agency, and Fred Tayar & Associates for Hillmount Capital.
February 13, 2020
Invictus MD Strategies (TSX-V: GENE), a Vancouver, British Columbia-based cannabis company, along with certain other related companies, obtained protection under the CCAA on February 13. Several factors contributed to the company's liquidity issues. First, it was unsuccessful in obtaining additional financing to complete a custom-built cultivation facility. Second, the strains of cannabis that are currently being harvested by Acreage - the company's primary operating entity - are not in demand as they do not have sufficient potency. While Acreage is currently in the process of changing over its plants to those with a higher level of potency, these plants will not be ready to harvest until mid-April 2020. Finally, the company's revenues have decreased due, in part, to lower consumer demand and market saturation. The company currently owes approximately $10.6 million to ATB Financial and $5.3 million to Authentic Brands, a New York-based brand management company. PwC was appointed monitor. Counsel is Cassels for the company, BLG for the monitor and Blakes for ATB.