Cannabis Chart Of The Week: How Serious Is The 2026 Debt Maturity "Tsunami"?

Much has been written recently about the upcoming “Tsunami” of Debt maturities in 2026. The articles have an alarming tone that we do not feel is representative of economic reality. The cannabis debt capital market is hot, and refinancings are getting done without the need for equity kickers or other expensive features. In the absence of 280e, the companies on the Chart are capable of carrying their debt and should be able to refinance their upcoming 2026 maturities. 

The orange line depicts estimated 2026 Earnings before Interest, Taxes, Depreciation, and Rent (EBITDAR). The black line shows EBITDAR plus June 2024 cash balances. 

The bottom black bar is our estimate of tax expense post 280e, which we assume will be eliminated prior to the tax year 2026. The brown bar represents Viridian estimates of operating lease payments for 2026. The green bars show estimates of 2026 interest expense. Purple bars depict estimates of 2026 Capex, and the blue bars at the top show Viridian estimates of 2026 debt maturities.

Clearly, the picture for 2026 is substantially more challenging than for 2025. Cash uses outstrip internal cash generation for all companies except GTI, Ascend, and TerrAscend, which have recently completed refinancings. Importantly, however, cash generation is expected to be sufficient for all cash needs, assuming upcoming maturities can be refinanced.

So, how big of an issue is the fact that over $2B of debt is coming due in 2026? Debt refinancings are a curious blend of financial capacity and market psychology. Generally, if the market believes a company is capable of handling its debt load, maturities of debt can be refinanced. After all, does anyone really expect that Cresco will amass $400M of cash in anticipation of its 2026 maturities? That would be highly inefficient as that cash has much better uses inside the company. 

The purple line shows fixed charge coverage (EBITDAR / (Int exp + 1/3 Rent). The lowest coverage ratios are by AYR (1.45x), Cannabist (1.62x), and Jushi (2.13x). These three companies have the most challenging job convincing the market of their ability to carry their debt. AYR’s coverage ratio is likely to be significantly higher if Florida passes adult rec. Schwazze has another issue. Its debt maturities are nearly 7x its current market cap.

Yes, there are some challenges. But there is also plenty of time to get the refinancings accomplished. We do not see a tidal wave of problems, just a hectic year for bankers.

The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from the Viridian Cannabis Deal Tracker.

The Viridian Cannabis Deal Tracker provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy. The Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis, CBD, and psychedelics industries. Each week the Tracker aggregates and analyzes all closed deals and segments each according to key metrics:

• Deals by Industry Sector (To track the flow of capital and M&A Deals by one of 12 Sectors - from Cultivation to Brands to Software)

• Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A) Status of the company announcing the transaction (Public vs. Private)

• Principals to the Transaction (Issuer/Investor/Lender/Acquirer) Key deal terms (Pricing and Valuation)

• Key Deal Terms (Deal Size, Valuation, Pricing, Warrants, Cost of Capital)

• Deals by Location of Issuer/Buyer/Seller (To Track the Flow of Capital and M&A Deals by State and Country)

• Credit Ratings (Leverage and Liquidity Ratios)

Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.