Canopy Growth Secures Long-Term Financial Stability Through Debt Restructuring

Canopy Growth CA1380351009

The Canadian cannabis company Canopy Growth has announced a major financial overhaul, fundamentally reshaping its balance sheet. The core achievement of this recapitalization is the extension of all material debt maturities to the early 2030s. While this move significantly bolsters the company's liquidity, it comes at the cost of notable dilution for current shareholders. Initial market reaction reflected these concerns, with the stock declining following the announcement.

On Wednesday, the company detailed a comprehensive recapitalization plan centered on two key transactions: securing a new term loan and restructuring a portion of its outstanding convertible debt.

The restructure delivers several critical outcomes:
* Extended Debt Horizon: All significant debt obligations are now deferred until at least January 2031.
* Enhanced Liquidity: The company expects its cash position to reach approximately CAD 425 million.
* New Financing: A USD 162 million term loan has been secured, maturing in January 2031.
* Convertible Debt Exchange: CAD 96.4 million in convertible notes, previously due in May 2029, have been restructured.
* Equity Issuance: The deal involves issuing roughly 9.5 million new common shares and 12.7 million share-purchase warrants.

Details of the New Term Loan

A creditor consortium led by JGB Management Inc. has provided Canopy Growth with a new USD 162 million term loan. The net proceeds of USD 150 million will be used for several purposes, including repaying approximately USD 101 million in existing senior secured debt that was due in September 2027. The remaining funds are earmarked for general corporate purposes, operational needs, and to support potential future acquisitions.

This loan carries a variable interest rate of Term SOFR (with a 3.25% floor) plus 6.25%. Management notes that this structure reduces the company's ongoing interest expense compared to its previous senior secured debt.

Restructuring the Convertible Notes

Concurrently, Canopy Growth reached an agreement with an institutional investor to restructure CAD 96.4 million of its convertible notes. The exchange package consists of multiple components:

Component	Details
New Convertible Notes	CAD 55 million, due July 2031
Cash Payment	CAD 10.5 million
Common Shares Issued	9,493,670
Share-Purchase Warrants	12,731,481

The newly issued convertible notes carry an annual coupon of 7.50% and are convertible into common shares at a price of CAD 1.83 per share.

Management's Perspective on the Deal

Executive commentary emphasized the long-term strategic flexibility gained from these transactions. Chief Financial Officer Tom Stewart highlighted the creation of a "financial runway through 2031," which he stated would allow the company to pursue growth opportunities and build upon its previously announced acquisition of MTL Cannabis Corp.

CEO Luc Mongeau focused on operational leverage, stating the recapitalization enables necessary strategic scaling, strengthens the company's market position, supports growing demand in the European medical segment, and paves the way toward sustainable positive adjusted EBITDA.

Market Context and Shareholder Dilution

This recapitalization occurs during a period of weakness for cannabis equities. The sector experienced significant profit-taking after an Executive Order in December 2025 aimed at accelerating the rescheduling of cannabis. Since mid-December, the AdvisorShares Pure US Cannabis ETF (MSOS) has declined by approximately 36%.

For existing shareholders, the capital measures are explicitly dilutive. The issuance of about 9.5 million new shares alone, based on a share price around USD 1.20, dilutes the outstanding share count by roughly 2.6%. The additional warrants issued could potentially amplify this effect.

However, the transactions directly address a pressing short-term concern. In its Q2 fiscal 2026 results released in November 2025, Canopy Growth had already indicated that the "substantial doubt" about its ability to continue as a going concern had been resolved. As of September 30, 2025, the company's cash balance exceeded its financial debt by USD 70 million.

Comparative Financial Position

The restructuring alters the company's balance sheet in several key areas:

Metric	Prior to Recapitalization	Following Recapitalization
Earliest Maturity Date	September 2027	January 2031
Cash Balance	~CAD 298 million (Q2 FY26)	~CAD 425 million (projected)
Senior Secured Debt	~USD 101 million	USD 150 million (new term loan)

The shift clearly prioritizes longer debt maturities and higher liquidity, while the debt and equity structure is adjusted through the note exchange and issuance of shares and warrants.

Path Forward and Upcoming Milestones

The company's next quarterly report is scheduled for February 6, 2026, covering its third-quarter fiscal 2026 results. This report will provide the first insights into the impact of the new capital structure and the ongoing integration of MTL Cannabis.

Canopy Growth had previously reported growth in its Canadian operations for Q2 FY26, with recreational cannabis revenue increasing 30% year-over-year and Canadian medical revenue rising 17%.

With debt maturities pushed to 2031 and projected liquidity of about CAD 425 million, near-term refinancing risk is substantially reduced. The critical focus now shifts to the operational execution of the MTL Cannabis acquisition and the expansion of European activities, converting the new capital structure into sustainable earnings. Canaccord Genuity acted as the exclusive financial advisor for the transactions.