Out Of Pocket: Which U.S. Cannabis Company Owes The Most Money In 2024?

In a recent report, Pablo Zuanic, senior analyst at Zuanic & Associates, analyzes the debt maturities of over 20 multi-state operators (MSOs) in the cannabis industry. This comprehensive review follows Ascend Wellness's significant $200 million debt refinancing.

Ascend Wellness Holdings AAWH recently issued $235 million in 5-year Senior Secured Notes at a 12.75% coupon rate. This move aimed to refinance a $215 million portion of a $275 million term loan. "Although the new notes have a higher effective interest rate (13.5%) compared to the previous loan (9.5%), Ascend managed to extend a significant maturity by four years," Zuanic said.

Debt Commitments

The report highlights various MSOs with notable debt maturities over the next two years. Ascend faced a substantial load at 65% of its sales, with $372 million in 2-year commitments versus $570 million in annualized sales. However, the company extended the bulk of its $275 million notes to 2029, alleviating immediate pressure.

Other MSOs with high ratios of debt commitments include Schwazze SHWZ at 55% and The Cannabist CCHW at 41%.

Additionally, 4Front Ventures FFNTF, Gold Flora GRAMF, and Jushi Holdings JUSHF are in the mid/high 30s range. Zuanic's analysis reveals that these companies face significant financial obligations that could impact their cash flows and operational flexibility.

Also Read: Harris Vs. Trump: Will Cannabis Rescheduling Survive Biden's Exit? Analyst On Potential GOP Victory

Tax Liabilities And Leverage

Income tax debt is a crucial factor in assessing the financial health of MSOs. According to Zuanic, "The MSOs with the highest income tax debt relative to sales are 4Front FFNTF at 53%, StateHouse STHZ at 39%, and Verano VRNOF at 29%." This indicates significant tax burdens that could impact their cash flows.

In addition to income tax debt, leverage ratios highlight companies with substantial debt relative to their sales. StateHouse has a leverage ratio of 1.8x sales, followed by 4Front FFNTF at 1.6x, Acreage ACRDF at 1.3x, Cannabist at 1.1x, and Goodness Growth GDNSF at 1x.

"These high leverage ratios reflect the companies' significant reliance on debt financing," says Zuanic.

While cannabis rescheduling could ease tax burdens for marijuana businesses, the IRS confirmed that current tax rules under Section 280E remain unchanged until the final rule is published. The IRS emphasized that marijuana remains a Schedule I substance and therefore no federal tax deductions are allowed for these businesses until rescheduling is finalized.

Read Next: IRS Confirms No Federal Tax Deductions For Marijuana Businesses Until Rescheduling Is Finalized

These issues will be among the hot topics at the upcoming Benzinga Cannabis Capital Conference in Chicago this Oct. 8-9. Join us to get more insight into what the wave of weed legalization means for the future of investing in the industry. Hear directly from top executives, investors, advocates, and policymakers. Get your tickets now before prices go up by following this link.

Photo: AI-generated image.