According to a recent Bloomberg article, New York-based LeafLink recently closed a significant credit facility of $250 million. Leaflink is a wholesale marketplace that connects retailers with a variety of brands and distributors in the legal cannabis marketplace. LeafLink also assists in providing liquidity to the broader market by factoring accounts receivable.
While the Bloomberg headline “LeafLink Debt Deal Shows Cannabis Entering a New Phase” may be a bit premature, the deal is a significant one. For one, $250 million is a significant credit facility—Cresco Labs announced a $100 million credit facility in January and Acreage Holdings announced a $200 million credit facility in February. But the timing is perhaps more important. The Cresco and Acreage deals were finalized pre-COVID when the economy was on much stronger footing. To see a credit facility of this size during the pandemic should give many in the industry hope that perhaps the cash crunch that has hindered growth may be easing. And this deal should also have a trickle down effect, helping smaller companies in the industry who work with LeafLink. According to Doug Gordon, the executive vice president of LeafLink’s parent, “[t]o date, most of the smaller operators haven’t been privy to any debt capital…This is the first product that has the ability to inject a large amount of liquidity to serve the industry at large.”
Per the Bloomberg article, according to Viridian Capital Advisors, cannabis companies raised $825 million in debt and $1.7 billion in equity in the first half of 2020. Debt financing has been growing more quickly, however. It will be interesting to see if that continues. We would expect that it would, as more and more lenders see opportunity in the cannabis industry in the second half of 2020 and 2021.
Stay tuned to our blog for updates on current developments impacting all aspects of the cannabis industry.