Cannabis buds lay along a drying rack at the CannTrust Niagara Greenhouse Facility in Fenwick, Ont., on June 26, 2018.Tijana Martin/The Canadian Press
Beleaguered cannabis producer CannTrust Holdings Inc. is facing severe liquidity issues and might be shutting down its business entirely in the near term if it cannot find new investors or strategic partners imminently.
In a statement released Thursday, the company said it had “faced challenges” and “does not have sufficient liquidity to operate beyond the near term,” despite attempting to restructure its ailing business by filing for creditor protection last July.
CannTrust is in default to one of its lenders because it recently breached a covenant on its debtor-in-possession loan that it received last summer. The covenant required the company to maintain a minimum level of EBITDA, or earnings before interest, tax, depreciation and amortization. CannTrust said the lender has not agreed to waive the default, even though it continues to advance funds under the debt facility.
The company filed for bankruptcy protection under the Companies’ Creditors Arrangement Act in April to allow it to try to restructure its operations, and received a debtor in possession loan of $22.5-million at that time.
“Despite the implementation of the CCAA plan, CannTrust’s CCAA proceedings are continuing to facilitate further discussions with potential investors and strategic partners and to develop an orderly wind-down plan to maximize the value of its assets in the event that a financing or strategic transaction option cannot be finalized,” Thursday’s statement said.
The company’s demise began in July, 2019, when regulators suspended its licences after discovering CannTrust had grown thousands of kilograms of cannabis illegally at its facility in Ontario’s Niagara region. The company also raised hundreds of millions of dollars in the United States allegedly using misleading information about the amount of licensed cannabis it had growing in its facilities.
In June, after a two-year investigation by the Ontario Securities Commission and the RCMP’s Integrated Market Enforcement Team, criminal charges, including fraud, were laid against three former executives of the company – former chief executive officer Peter Aceto, former vice-chairman Mark Litwin, and former chairman Eric Paul. Those court proceedings continue.
Despite getting its Health Canada operating licences reinstated in August, 2020, CannTrust has faced a slew of class-action lawsuits that have hampered its ability to operate. On Thursday, the company said it had contributed $50-million to a trust that would be used for class-action settlements.
Part of the creditor protection plan involved the resignation of four long-time company directors – Robert Marcovitch, Mitchell Sanders, Mark Dawber and Shawna Page. CannTrust said those resignations would take effect immediately.
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