Gotham Green Partners Demands Debt Payments From iAnthus Capital
New York-based cannabis firm iAnthus Capital Holdings and wholly-owned subsidiary MPX Bioceutical received a demand for payment on debt owned by Gotham Green Partners (GGP), a longtime investor in the multistate cannabis operator.
In a news release, iAnthus said it received a letter from the cannabis-focused private equity firm stipulating that “the entire principal amount, together with interest, fees, costs and other allowable charges that have accrued” must be repaid.
GGP also provided iAnthus with a “Notice of Intention to Enforce Security,” meaning that it plans to force the sale of certain collateralized assets.
Over the last two years, GGP has led $106 million worth of investments into iAnthus, the overwhelming majority of which was provided in the form of senior secured debt bearing an annual interest rate of 13%.
GGP’s involvement with iAnthus began midway through 2018, when it invested $50 million to help iAnthus continue scaling its operations and to pay off a $20 million loan from Green Thumb Industries.
According to filings, iAnthus issued $40 million of senior secured notes with a 13% coupon, and $10 million worth of equity.
Then, in September 2019, GGP provided another $20 million worth of debt financing at 13%, and secured the ability to lend up to $66.5 million more. Later that year, GGP led another $36 million round of debt-financing along with other unnamed co-investors.
As of June 11, iAnthus was carrying $97.5 million of 13% senior secured convertible debt, $60 million of 8% unsecured convertible debt, and $1.6 million of other debt obligations.
At the end of 2019, GGP had control and direction over roughly 26% of all issued and outstanding iAnthus shares, according to a filing. The firm also has the ability to acquire $31.5 million in additional notes and warrants, giving it significant leverage moving forward.
iAnthus still has until the end of June to make $4.4 million in interest payments due on its debt obligations, however the firm has already defaulted on those payments once and has said it expects to default again.
Nevertheless, iAnthus claims that Canaccord Genuity Corp., which was hired to conduct a strategic review of the company, has received “several expressions of interest” from parties willing to repay the debt “in full and in cash.”
The company did not provide additional details about a potential investor coming to rescue the cannabis firm, nor did it comment on speculation that a management buyout offer (MBO) could be in the works.
Details of an MBO were outlined in a recent lawsuit brought against iAnthus, GGP, as well as several current and former executives and investors.
The lawsuit was filed last month in the U.S. Southern District of New York by Hi-Med LLC, a Florida business owned by Holtec International founder Kris Singh. According to the lawsuit, Hi-Med owns over 14 million shares of iAnthus and holds $5 million worth of its debt.
In addition to alleging that GGP and iAnthus “conspired” to misrepresent their financial relationship, the lawsuit claims that iAnthus co-founder Randy Maslow and other executives have explored a potential MBO, whereby GGP’s investments would be “purchased at a 3% premium” while other investments “would be purchased at a 40% discount.”
iAnthus is also embroiled in a legal battle with Oasis Investments, which was issued $25 million of unsecured debt and has alleged that iAnthus breached certain financial covenants. Additionally, the cannabis firm is facing several class action lawsuits which allege that its stock fell more than 62% after the company said it would default on interest payments to GGP.
Beyond the company’s myriad legal and financial troubles, the Canadian Securities Exchange also issued a cease trade order for iAnthus securities after the company failed to file its 2019 financial results following multiple postponements and promises to issue the report. iAnthus has said it expects to file before the end of the month.
Recall that last month, entrepreneur and marketer Mark Dowley resigned from the iAnthus board. Dowley was one of five independent board members tasked with investigating former iAnthus CEO Hadley Ford, who exited the company in April following a probe into alleged conflicts of interest.
During that investigation, a special committee determined that Ford violated company policy by failing to disclose the acceptance of two personal loans from iAnthus investors totaling $160,000.
A phone call placed to an iAnthus executive was not returned as of press time. Additional information is available in the company's official news release.