Canopy Growth Strengthens Balance Sheet with Major Debt Restructuring

Canopy Growth CA1380351009

Trading in Canopy Growth shares saw significant activity today following the announcement of a comprehensive financial overhaul. The cannabis producer has secured a new $150 million term loan and converted a portion of its existing debt into equity. This strategic move extends major debt maturities to January 2031 and substantially mitigates near-term solvency concerns.

Upon completion of the transaction, the company anticipates holding approximately CAD $425 million in liquidity. Investors are now weighing the reduction in bankruptcy risk against the dilutive effect of the debt-for-equity conversion.

The cornerstone of this recapitalization plan is a new senior secured term loan amounting to $150 million. A banking syndicate led by JGB Management Inc. is providing this financing, which matures in January 2031. The loan carries an interest rate of Term SOFR plus 6.25%, with a floor of 3.25%.

Key components of the complex transaction include:

• Debt Refinancing: A portion of the fresh capital will be used to retire roughly $101 million in existing senior secured debt, which was originally scheduled to mature in September 2027.
• Debt Exchange: Canopy Growth is exchanging CAD $96.4 million in convertible notes due in May 2029 for a package valued at approximately CAD $80 million. This package consists of CAD $55 million in new convertible notes (due July 2031), CAD $10.5 million in cash, plus common shares and warrants.
• Enhanced Liquidity: Management projects a cash position near CAD $425 million once all measures are finalized. These funds are earmarked for supporting ongoing operations and strategic growth initiatives.

Chief Financial Officer Tom Stewart described the outcome as a "position of strength," highlighting the significantly extended financial planning horizon. The market's current reaction reflects the inherent tension between a lowered probability of default and the dilution faced by current shareholders.

Strategic Context and Operational Progress

This recapitalization follows a period of stringent cost-cutting measures under CEO Luc Mongeau. While historically burdened by substantial cash burn, the company's recent financial metrics show marked improvement.

• Over the last twelve months, Canopy Growth reported an adjusted EBITDA of approximately negative $23 million.
• For the second quarter of fiscal year 2026 (ended September 30, 2025), the adjusted EBITDA loss narrowed sharply to just $3 million.

The successful refinancing supports this positive trajectory, underscoring the firm's improved credit standing in a challenging financing environment. It also aligns with the previously announced acquisition of MTL Cannabis in December 2025. This purchase is designed to bolster Canopy Growth's standing in the Canadian medical market and enhance its supply chain for international exports, with a particular focus on Europe.

The Path Forward

In the immediate term, focus shifts to the imminent closing of the transaction. By pushing debt maturities out to 2031, the company has removed a significant valuation overhang that has pressured its stock for years.

The next major milestone will be the release of the Q3 report for fiscal 2026, expected in early February. Analysts will scrutinize whether the integration of MTL Cannabis and continued cost discipline can propel the company from its current quarterly adjusted EBITDA loss of $3 million toward breakeven or profitability. Concurrently, how the market ultimately prices in the shareholder dilution remains a critical factor. The newly established CAD $425 million liquidity buffer now provides a fundamental safeguard that was previously absent.