An investment group led by a Dutch firm is taking control of most of the assets of cannabis producer CannTrust Holdings Inc. CNTTQ after a long sales process under bankruptcy protection.
Amsterdam-based holding company Marshall Fields International BV and a group of individual investors will acquire 90 per cent of CannTrust Equity. CannTrust Equity is a new subsidiary of CannTrust Holdings, and holds the company’s cannabis licences through its operating division, CannTrust Inc.
Meanwhile, shareholders will retain 10 per cent of the outstanding common shares through CannTrust Holdings, the public division of the company, which was previously listed on the Toronto and New York stock exchanges.
Marshall Fields is subsidiary of Kenzoll BV, a special purpose investment vehicle invested in cannabis, energy and technology companies. Kenzoll itself is a recent carve-out of Dutch venture capital firm Ramphastos Investments Management, which is majority-owned by Dutch billionaire Marcel Boekhoorn.
Marshall Fields will have 18 months, from the date of closing, to exchange its shares in CannTrust Equity for common shares of CannTrust Holdings.
CannTrust filed to restructure under the Companies’ Creditors Arrangement Act in 2020, after it was found to have been violating Heath Canada compliance rules.
Under the transaction, if approved in court Friday morning, the investor and two lenders will also provide a debtor-in-possession loan of $5.5-million, to be paid in cash immediately in order to keep the company afloat in the short term.
While the purchase price was not disclosed, the amount will allow the company to follow through on its relaunch plans, including retaining some employees, and cover creditor claims, according to documents filed by CannTrust’s lawyers at McCarthy Tetrault LLP. It is uncertain which employees will keep their jobs.
Individuals who are investing alongside Marshall Fields include Greg Guyatt, Canntrust’s current chief executive officer, Jeffrey Zietlow, the company’s chief commercial officer, and lenders Daniel Koehn and Andrew Peppin.
In an affidavit submitted to court, Mr. Guyatt said the deal was better than the alternative: liquidation.
“I believe that CannTrust Holdings and its shareholders will benefit from their continued ownership interest in the newly recapitalized business of CannTrust Opco and the opportunity to realize value from the potential future success of that business and that this result is better for CannTrust Holdings stakeholders than a liquidation,” Mr. Guyatt said in the affidavit.
In 2019, the cannabis producer’s shares plummeted after news emerged that the company was growing thousands of cannabis plants – covering nearly 50 per cent of one growing space – without licences from Health Canada. Several of the company’s former executives have since been charged with fraud.
In January, CannTrust paid $50-million into a trust to settle a class action lawsuit. The funds went to shareholders who had purchased equity in the company the year before the fraud was discovered, on the grounds that CannTrust did not disclose this information in its financial statements. KMPG LLP, the company’s former auditor, was the only defendant that did not agree to the settlement, and litigation is continuing.
The financing comes after a long slog to get CannTrust back on its feet. In a previous attempt to find investors, CannTrust identified 101 potentially interested parties, 36 of which were known possible bidders. However, none of the 36 put forward proposals. The most recent attempt to find investors resulted in three letters of interest from potential buyers, from which Marshall Fields was selected.
The company has been dealing with liquidity issues since filing for bankruptcy. In late January, Ernst & Young LLP, the company’s court-appointed monitor, submitted a legal document that estimated CannTrust’s cash balance during the week ending March 6, 2022, would be less than $800,000, if expected refunds had been repaid.
Editor’s note: The amount CannTrust paid into a trust to settle a class action lawsuit has been corrected in the online version of this story.
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Irene Galea