Bank of Montreal (BMO) is providing Aurora Cannabis Inc. with C$200 million ($150 million) in debt financing, marking the largest loan yet to be extended to the cannabis industry.
The debt facility is comprised of a C$150-million term loan and a C$50-million revolving credit facility, both of which will mature in 2021.
By entering into this financing deal with Aurora Cannabis, Bank of Montreal is cementing its position as the most aggressive among the major banks in Canada. It can be recalled that in May, Bank of Montreal advised Aurora Cannabis on its C$2.9-billion all-stock bid to acquire MedReleaf Corp. And in January, the lender signed an underwriting deal with Canopy Growth.
The debt facility will be secured by Aurora Cannabis’ production facilities, including its new Alberta Sky plant, in order to finance the company’s expansion. The Edmonton, Alberta-based cannabis producer estimates that it will produce more than 100,000 kg of marijuana per year, and it is slated to deliver its first harvest this week.
Aurora Cannabis can also request an increase to the term loan of up to C$45 million, subject to the BMO’s agreement and following the country’s legalization of recreational cannabis in October. Moreover, will provide up to C$5 million in other credit.
The closing ot the arrangement between BMO and Aurora Cannabis is still subject to final due diligence and to some conditions being satisfied.
Aurora Cannabis will pay an interest rate of more than 4% per year.
Bank of Montreal is the fifth largest bank in Canada in terms of assets.
According to Aurora Cannabis Chief Executive Officer Terry Booth, this deal is the largest traditional debt facility in the sector by far. The funds, Booth said, provide the company additional fuel to complement their end-to-end portfolio of vertically integrated, horizontally and geographically diversified assets aimed at building a pre-eminent global cannabis company with a margin profile that is superior.
Meanwhile, Aurora Cannabis CFO Glenn Ibbott said that this deal is a validation of their operational effectiveness and is major milestone in the cannabis industry. He added that it also marks an exciting new stage of their long-term relationship with BMO, which is a Tier 1 bank with excellent local and international reputation.