As spurned lenders begin to encircle marijuana companies owing an estimated $3 billion in collective debt coming due soon, one overleveraged operator is resorting to what observers say are increasingly creative and desperate methods to protect assets from liquidation.
That includes shutting down licensed locations and even moving a pre-roll machine from one location to another in an attempt to elude creditors, according to a lawsuit filed earlier this month.
Those are some of the allegations made against Colorado-based Medicine Man Technologies, which does business as Schwazze, by one of its lenders, Virginia-based cannabis-centric investment fund Altmore Capital, in a lawsuit filed May 3 in Denver District Court.
The techniques Schwazze is allegedly using to delay repaying Altmore are familiar to high-yield markets but “seem like a new development in cannabis restructuring,” said Frank Colombo, a managing director at New York-headquartered investment banking and data firm Viridian Capital Advisors.
But the situation might also portend a halt to the stalling tactics that have so far avoided any major reckoning, such as an adjustment of cannabis companies’ valuations or of the loans offered them.
“In terms of a harbinger of things to come, we’ve seen multiple rounds of ‘extend and pretend’ stuff done,” Colombo added.
“I’ve been arguing we’re coming to a time where you need to try to fix these companies.”
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