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Insolvent Canadian recreational marijuana retailer Trees Corp. has entered creditor protection, becoming the latest debt-laden cannabis company to keep its creditors at bay while seeking restructuring.
Trees announced its initial creditor protection order from an Ontario court on Dec. 22.
Toronto-headquartered Trees is not the same as a U.S.-based marijuana company also named Trees Corp., which operates in Colorado and Oregon.
Alongside the creditor protection order, Trees has taken a debtor-in-possession loan worth up to 800,000 Canadian dollars (roughly $600,000).
The lender is One Plant Retail Corp., an Ontario retailer with more than 40 stores.
Trees operates 13 cannabis stores, including nine in Ontario and four in British Columbia.
The company “suffered significant losses in the tens of millions of dollars” over the past three years, according to a statement of fact filed with the court.
In total, Trees and its subsidiaries owed CA$13.4 million in secured liabilities as of Dec. 21, plus unsecured liabilities.
That includes roughly CA$500,000 owed to Trees’ senior secured creditors, whose secured debentures “accrue interest at an annual rate of 58.8%,” the court filing notes.
Other secured creditors are owed roughly $1.3 million.
Trees also has settlement deals “with former management and certain legal (advisers)” that siphon off liquidity, requiring monthly payments of CA$15,000, according to the filing.
“Given the current state of the capital markets, the applicants (Trees) are unable to obtain debt or equity financing at a cost that the applicants can service,” the document says.
The retailer has 102 employees.
Trees’ entry into creditor protection follows a failed business combination.
Private company 420 Investments announced its plan for a reverse takeover of Trees in July but backed out of the deal in November.
Calgary, Alberta-based 420 Investments operates cannabis stores under the Four20 brand, mostly in Alberta.
Trees shares are listed as TREE on the Cboe Canada exchange, but trading has been halted.
Canadian cannabis insolvencies such as Trees’ remained common in Canada throughout 2023.
The insolvencies often resolve with competing cannabis companies acquiring the distressed operator’s assets through the insolvency process.
For example, major retailer Fire & Flower was acquired by Fika Cannabis in August for CA$36 million.
Solomon Israel can be reached at solomon.israel@mjbizdaily.com.
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