The Canadian cannabis producer Canopy Growth Corporation has executed a comprehensive financial restructuring aimed at strengthening its balance sheet. The multi-faceted plan involves securing a new $150 million term loan and extending the maturity of its existing debt obligations to at least 2031. The market’s reaction to the news was split, with shares initially rising before retreating on the following trading day.
Strategic Refinancing to Extend Runway
Central to the restructuring is a $150 million term loan arranged by a lender consortium led by JGB Management Inc. This credit facility carries a variable interest rate of Term SOFR plus 6.25 percentage points, with a floor of 3.25% for the reference rate. According to the company, this new debt structure is designed to lower ongoing interest expenses compared to its previous obligations.
The proceeds from this loan are earmarked for several purposes:
– Repaying approximately $101 million in senior secured debt due in September 2027.
– Providing working capital and funding general corporate needs.
– Potentially financing future strategic acquisitions.
Concurrent Debt-for-Equity Exchange
In a parallel move, Canopy Growth has renegotiated terms on a portion of its outstanding convertible notes. The company converted roughly CAD $96.4 million in notes maturing in May 2029 into a new package valued at approximately CAD $80 million. This exchange includes:
- CAD $55 million in new convertible notes due July 2031, bearing a 7.50% annual coupon.
- A cash payment of CAD $10.5 million.
- The issuance of 9,493,670 new common shares.
- 12,731,481 share purchase warrants, exercisable at CAD $2.16 per share.
The newly issued convertible notes carry a conversion price of CAD $1.83 per share. Additionally, lenders received 18,705,577 warrants with an exercise price of US $1.30 per share and a five-year term.
Enhanced Liquidity and Management Commentary
Upon closing these transactions, Canopy Growth anticipates holding approximately CAD $425 million in liquid assets. The company frames this as a significantly more robust financial position.
CFO Tom Stewart described the outcome as a “strong starting position,” citing a fortified balance sheet, greater liquidity, and extended debt maturities. He emphasized that the moves create a financial “runway” stretching to 2031, which should provide ample room for strategic growth initiatives.
CEO Luc Mongeau, who assumed the role in early 2025, highlighted the strategic rationale behind the recapitalization. He stated the measures are intended to support “strategic scaling” and pave the way toward achieving sustainable positive adjusted EBITDA.
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Market Response and Dilution Concerns
Investor sentiment following the announcement was mixed. On the day the plans were revealed, Canopy Growth’s share price advanced by approximately 7%, as the market initially welcomed the extended debt timeline and improved liquidity.
The following session saw a reversal, however, with the equity declining about 7.8% to close at US $1.19, down from US $1.29. The pullback was attributed partly to broader weakness in the cannabis sector and partly to specific concerns over significant shareholder dilution from the newly issued warrants and convertible instruments. In after-hours trading, the stock held around US $1.20, with trading volume remaining elevated.
The potential for dilution is substantial, stemming from:
– The immediate issuance of 9.5 million new common shares.
– 18.7 million warrants issued to lenders (exercise price: US $1.30).
– 12.7 million warrants issued to investors (exercise price: CAD $2.16).
– Convertible notes that can be exchanged for shares at CAD $1.83 each.
This collective increase in the potential share count is seen as a key factor in the stock’s Friday decline.
Broader Strategic Backdrop
This refinancing effort builds upon recent corporate activity. It follows the announced acquisition of MTL Cannabis Corp. and leverages the company’s second-quarter fiscal 2026 results, published in November, which reported consolidated net revenue of $67 million and an improved adjusted EBITDA performance.
Canaccord Genuity acted as the exclusive financial advisor for the transactions. Legal counsel was provided by Cassels Brock & Blackwell LLP, Goodwin Procter LLP, and Paul Hastings LLP.
Path Forward
With no major debt maturities before 2031 and a cash position near CAD $425 million, Canopy Growth has bought considerable financial flexibility in a challenging industry climate. The upcoming third-quarter fiscal 2026 results will be a critical indicator of the pace at which CEO Mongeau and his team can drive operational improvements and progress toward sustained positive adjusted EBITDA.
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