COVID-19, 'severe liquidity crisis' force Green Growth Brands to file for creditor protection

(GETTY)
(GETTY)

Shares of Green Growth Brands (GGB.CN) plunged more than 70 per cent to just above a penny on Wednesday after the cannabis firm announced it has filed for creditor protection.

Citing a “severe liquidity crisis” and the impact of COVID-19, the Columbus, Ohio-based company filed for insolvency protection under the Companies’ Creditors Arrangement Act (CCAA). An initial 10-day order from the Ontario Superior Court of Justice will shield Green Growth Brands from creditors and other parties until May 29.

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All Js Greenspace LLC, a firm backed by the billionaire Schottenstein family, has agreed to fund up to US$7.2 million in credit throughout the court proceedings. Green Growth Brands has roughly $718,000 in cash remaining on its balance sheet across its various business lines. 

“The CCAA filing was necessitated due to a severe liquidity crisis in the face of material matured and maturing debt, which . . . was further exacerbated by the negative impact of the COVID-19 pandemic,” the company stated in a release.

Green Growth Brands had been in the process of pivoting from its mall-based CBD kiosk business towards dispensary operations in several states.

The company indefinitely suspended its mall-based business, citing a lack of profitability, shortly before the COVID-19 pandemic forced most shopping centres to close their doors. The company added that orders by Nevada Governor Stephen Sisolak to limit cannabis dispensary operations in that state during COVID-19 have also impacted the business.

Green Growth Brands has fallen on hard times since its headline-grabbing $2.4-billion hostile bid for Aphria (APHA.TO)(APHA), one of Canada’s largest pot producers, in January 2019. The bid was derailed by a short-seller attack that erased more than half of the company’s market value. 

Shares listed on the Canadian Securities Exchange have fallen more than 98 per cent over the past year.

Earlier this spring, Green Growth brands fired roughly 800 workers from its mall-based CBD business. The company was in the process of selling an 80 per cent stake in the chain of kiosks, which sold products through stores including American Eagle and Abercrombie & Fitch inside about 200 shopping centres in the United States. 

BRN Group, a company whose chief executive previously ran Sean Combs’ portfolio of businesses, was named as a potential buyer. It is unclear if the deal closed as COVID-19 shut down malls across the country.

Retail veteran Peter Horvath stepped down as chief executive officer in March, leaving chief operating officer Randy Whitaker to fill the role on an interim basis. Horvath recently announced a new role at Hightimes Holdings, leading the magazine company in its transition to operating dispensaries. 

 Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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