MariMed Refinance: A step in the right direction, but not a Panacea
Summary:
A U.S Chartered Bank issued MariMed a $58.7 million loan commitment
Cash Flow improves in the short to medium term
A ~$23.5 million cash outflow will occur between 11/1/28 and 6/1/29
The structure of the debt ties MRMD stock closely to banking reform
Deal Terms: Total loan commitment is $58.7 million with a ten-year term. The first year of payments are interest only, with the remaining payments based on a 20 year amortization schedule. Notably, the initial interest rate is set at 8.43%, with a reset after five years based on the Federal Home Loan Bank of Boston's rate plus 3.50%.
Sources of Funds:
Loan from Needham Bank: $58,695,000.
Initial Advance: $52,836,121.
Available for Advance: $4,892,000.
Post-Construction Advance: $966,879.
Uses of Funds:
Payoff Existing loans: $46,795,961.
Chicago Atlantic: $32,664,294.
Bank of New England: $11,880,667.
Ermont Inc. Sellers Note: $2,250,000.
Commitment Fee: $440,213.
Collateral Reserve Account: $1,500,000.
Remaining funds for Hagerstown, Maryland cultivation facility expansion.
The deal is structured mostly as a refinance while providing $4mm at close for the construction of the Maryland facility with an additional $6mm available.
Cash Flow Impact: MariMed's two largest pieces of its legacy debt was nearing maturity and/or had high interest rates.
Chicago Atlantic:
Amortization: 1.0% of the principal amount outstanding per month
Balloon: Remaining principal balance due on January 24, 2026
Extension: To January 24, 2028
Interest Rate: Floating, bank prime rate plus 5.75% per annum
Effective Rate (11/1/23): 14.25% (Prime - 8.5% (11/1/23) plus 5.75%)
Bank of New England:
Interest Rate: 6.5% per annum
Balloon: Remaining principal balance due in August 2025
As a result of the refinance, Jon Levine (CEO), stated that the “principal and interest savings of $4.7 million in the first year, and $3.5 million a year for the four years thereafter". However...
Balloon Payments: While the facility has 10 year term, 5 years from now on 11/1/28 MariMed has four $5.86mm balloon payments as part of its "New Bedford Option to Purchase" obligation. In the aggregate ~$23.5mm is due by 6/1/29 referred to as the “Additional Reserve Collateral” in the 8-K. A summary of cash flows is illustrated below.
Additional Debt: In the 8-K, there is mention of a $7 million debt “Teneo Seller Note”, the 10-Q as of 11/09/23 mentions a $7 million “Ermont Note”. Assuming the two names are for the same debt facility, the details from the 10-Q has this debt facility amortizing from March of 2025 to March of 2029. In the aggregate, 56% of the $65.7 million is due within the next 5.5 years.
Conclusion: While the refinancing provides MariMed with a manageable debt structure to support its expansion plans for the next 2(ish) years, the risk lies in when/if the company begins to save cash to exercise the New Bedford option. The structure of the debt facility makes it difficult to refinance just the “New Bedford Mortgage”. If the company is too late in its efforts to save up cash for this obligation, a significant potion of its indebtedness could become much more expensive. On the flip side, if the macro bet that banking reform occurs and larger institutions begin deploying capital prior to November 2028, the company should be able to refinance its entire indebtedness and match up the maturities of all its obligations.
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1) https://ir.marimedinc.com/sec-filings/all-sec-filings/content/0001522767-23-000129/0001522767-23-000129.pdf
2) https://ir.marimedinc.com/sec-filings/all-sec-filings/content/0001522767-23-000123/0001522767-23-000123.pdf
