$5M debt forces AgMedica to acquire creditor protection
In the face of a dire financial crisis, a medical marijuana production company in Chatham has acquired federal credit assistance to keep its business up and running.
AgMedica Bioscience Inc. has been granted protections under the Companies’ Creditors Arrangement Act (CCAA), which is federal legislation that will allow the organization to maintain its status quo to formally restructure its financial affairs. AgMedica voluntarily filed documents with the Ontario Superior Court of Justice for CCAA assistance on Monday, which stated the company is “currently in a liquidity crisis.”
According to a statement released on Thursday, the company cited “rapid growth, evolving regulations, access to capital, product supply and demand imbalance, and inadequate distribution channels” as the issues that have resulted in AgMedica accumulating around $5 million in debt.
“We are facing the same issues that are affecting many of our competitors in this new and emerging industry,” said Donna Husack, AgMedica’s vice president of human resources, in the statement. “We’ll continue to manage and conduct our business without interruption. We have access to the money needed to operate during this period, and we’ll continue to work with our stakeholders according to established agreements. ”
AgMedica Bioscience Inc. has approximately 160 full-time employees, most of whom are located in Chatham-Kent.
Financial problems began for the medical marijuana production company following the legalization of recreational cannabis in Canada on October 17, 2018. According to the court filings, AgMedica devoted significant amounts of its capital to keep pace with other licensed producers. The company prepared to take the company public in order to raise significant amounts of capital from investors, however, the market ultimately did not support the public offering due to insufficient public investment in the industry.
This forced AgMedica to search for other alternative long-term financing options, and in September 2019, AgMedica attempted to acquire a senior secured debt financing package in the amount of $60 million. However, in late October 2019, the prospective lender advised that it was no longer willing to move forward due to prevailing market conditions.
As a result, AgMedica was forced to address its financial issues by laying off 30 employees, securing small bridge loans, and attempting to sell off all of its real estate (excluding the facility located at 650 Riverview Dr.). However, a cash flow forecast indicated AgMedica would have run out of cash by the beginning of this week had it not been granted assistance through the CCAA.
Publically, the business appeared to be thriving with AgMedica hosting a job fair in July 2019 to fill 50-70 cultivation positions. AgMedica also received approval from Health Canada in September 2019 to expand its Riverview facility and add another 12 flowering rooms.
“Our employees are on the job and our facilities continue to operate. A successful restructuring will require an improvement in the economic structure of our operations. The process we’ve initiated provides the time and ability to implement those measures,” said Husack in the statement. “We are committed to achieving a positive outcome.”