While the marijuana industry awaits potential key regulatory changes that could boost profits, Schwazze is closing in on a restructuring with creditors that will slash the dispensary operator's debt load and inject it with new money.
The company will give up some of its more than 60 cannabis shops in return for a $65 million cash injection, according to people familiar with the situation. The senior lenders will take over the properties in a process known as Article 9, a cheaper and faster process than Chapter 11. Bankruptcy isn't an option for the company because of the lack of federal legislation covering weed.
Schwazze's common and preferred shares are expected to be wiped out as part of the restructuring, the people said, asking not to be identified. About $45 million of cash from the deal will be used to refinance the so-called seller notes with the balance used to provide working capital, they added.
Talks are ongoing and plans could change, said the people. Schwazze didn't immediately respond to requests for comment. The senior secured noteholders will submit a credit bid via an auction process to acquire a select portion of performing properties, with the remaining locations subject to a wind down, the people said.
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