Cannara adds $10-million credit facility with BMO

Executive Summary

• Cannara Biotech Inc. has amended its existing credit facility with Bank of Montreal (BMO) to include a new $10-million committed delayed capital expenditures debt facility.
• The new facility is designated to fund the initial phase of the post-harvest expansion at the company's Valleyfield facility, including new hang-drying, freezing, trimming, packaging, and butane extraction capabilities.
• This expansion aims to activate cultivation rooms beyond the current 12 operating zones, supporting the company's long-term goal of achieving 100,000 kilograms in annual production capacity.

Key Details

• Facility Structure: Addition of a $10-million committed delayed capital expenditures debt facility.
• Availability: Available by way of multiple draws until July 2026.
• Repayment Terms: 10-year amortization schedule; repaid in quarterly instalments of unblended payments of principal and interest, with the remaining balance due on December 31, 2027.
• Use of Proceeds: Financing the initial phase of post-harvest expansion at the Valleyfield facility.
• Expansion Scope: Introduction of state-of-the-art hang-drying, freezing, trimming, and packaging capabilities; expanded processing and storage areas; and enhanced butane extraction capacity.
• Production Goals: Enables upcoming cultivation room activations beyond the current 12 operating zones, advancing toward a long-term goal of 100,000 kilograms in annual production capacity.
• Previous Interest Rate Reductions:
  • On June 18, 2025, a total 50-basis-point reduction in the interest rate spread was secured (25 bps via amendment, 25 bps triggered by Q2 FY2025 covenant thresholds).
  • An additional 25-basis-point reduction was achieved in Q4 2025 following Q3 2025 covenant thresholds.
  • Overall cost of debt declined from over 8% in 2024 to below 6%.
• Removal of Guarantee: In March 2025, a limited recourse guarantee provided by a related party was eliminated after meeting key covenant thresholds, reducing annual interest expense by approximately $375,000.

Notable Quotes

• "These amendments to our credit facility with BMO reflect the confidence in Cannara's growth strategy and operational performance," said Zohar Krivorot, president and chief executive officer of Cannara.
• "With improved financial flexibility and reduced financing costs, we are well positioned to execute the expansion of our Valleyfield facility and deliver sustained value to our shareholders. Cannara remains committed to maintaining a strong balance sheet while investing in strategic initiatives that support long-term profitable growth," added Nicholas Sosiak, chief financial officer of Cannara.