New Cannabis Industry Player Gets Into The Game As Another Weed Business Rethinks Strategy

SunStream USA was formed on Friday as SunStream Bancorp Inc. is poised to sign restructuring documentation with cannabis company Surterra Holdings, Inc., which is doing business as Parallel. SunStream is a joint venture sponsored by SNDL Inc. SNDL.

Why It Matters

SunStream USA anticipates being a US platform with one or more independent third-party investors, which will be independently managed and governed.

SunStream, or its designee, is vetting an opportunity to own non-voting and non-participating exchangeable securities in SunStream USA, which would include the right to exchange such securities into common equity or equity-like securities in the future if certain conditions are met.

The SunStream USA structure could allow SNDL to participate in the future in the equitization of certain senior credits made by affiliates of SunStream that are currently undergoing restructurings while complying with all U.S. federal and state laws.

"The restructuring of non-performing credit investments in SunStream is a notable opportunity to rebalance the risk-reward of SNDL's existing investments," SNDL's CEO Zach George said.

Come and meet Zack George at the Benzinga Cannabis Capital Conference on September 27-28.

What's Next

SNDL anticipates having board nomination rights in SunStream USA, which George could serve.

The SunStream USA structure will be reviewed by Nasdaq as the required listing authority for SNDL prior to its execution.

Parallel Restructuring

On Thursday, Sept. 21, Talladega LP, a partnership wholly owned by SunStream affiliates and other secured creditors of Parallel, signed a strict foreclosure with Parallel and certain of its subsidiaries.

Under that deal, CDXX TransCo, LLC will foreclose upon certain of Parallel's cannabis operations in Florida, Massachusetts, Texas and Nevada that were pledged as collateral under Parallel's existing debt instruments. 

Following the closing of the Parallel transaction, TransactionCo is anticipated to own assets essential for operations in Florida, Massachusetts, Texas and Nevada.

TransactionCo will have roughly $100 million of debt outstanding, of which $42 million will be held by Talladega (affiliate of SunStream), representing a reduction of more than 80% from Parallel's total outstanding debt.

SunStream USA is expected to own two-thirds of the equity interests of TransactionCo. while the remaining one-third is expected to be owned by certain holders of Parallel's existing senior secured notes.

SNDL Price Action

SNDL’s shares traded 0.52% lower at $1.92 per share at the market close on Friday afternoon.

The Benzinga Cannabis Capital Conference, where deals get done, is returning to Chicago on September 27-28 for its 17th edition. Get your tickets today before prices increase and secure a spot at the epicenter of cannabis investment and branding.

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Photo: Courtesy of Iryna Rahalskaya on Shutterstock