Canadian cannabis giant SNDL has announced plans to enact a major financial restructuring project, slashing 106 full time positions.
The embattled company says it will require a one-time investment of $11m over the next 18 months to push through the restructure, which it hopes will help it save $20m annually.
This will be achieved through the ‘optimisation of corporate overhead spending’ and the consolidation of its cannabis segments into a single unit under the leadership of Tyler Robson.
SNDL says it expects to reap the full benefits of this restructure by mid-2025, and start to ‘capture some of the opportunities’ as early as Q3 2024.
It comes just days after SNDL moved to purchase the debt of Delta 9 Cannabis for US$21m, making the company its senior secured creditor, now owed more than $40m by the company.
‘Agressive’ demands for repayment from SNDL are understood to be one of the key factors which drove Delta 9 to obtain creditor protection under the Companies’ Creditor Arrangements Act (CCAA), granting ot a 10-day stay on claims and proceedings.
Following advice from legal and financial advisors, Delta 9’s board reportedly decided that CCAA protection is in the company’s best interest due to its cash and liquidity issues, debt repayment challenges, and limited ability to raise capital.
Delta 9 has entered into a binding term sheet with 2759054 Ontario Inc., operating as The FIKA Company, to maximize value for shareholders and creditors. The FIKA Company will acquire Delta 9’s cannabis retail and logistics businesses and facilitate a sale and investment solicitation process for its licensed cannabis production business. The Plan Sponsor will provide up to $16 million in interim financing and propose issuing shares and repaying secured debt as part of the restructuring process.
John Arbuthnot, CEO of Delta 9, expressed confidence in the agreement with FIKA, believing it will maximize value for all stakeholders. Throughout the restructuring, Delta 9’s management will continue daily operations under the oversight of Alvarez & Marsal Canada Inc., the court-appointed monitor.
A comeback application to seek further approvals, including the term sheet and interim financing, is scheduled for July 24, 2024. Meanwhile, the Toronto Stock Exchange is expected to review Delta 9’s listing status.
