Freedom Cannabis Inc. announced on August 13, 2024, that it and its subsidiaries sought and received an order for creditor protection from the Alberta Superior Court of Justice pursuant to the Companies’ Creditors Arrangement Act (CCAA).
In an email announcement, the Alberta-based cannabis producer says the “difficult but necessary decision to commence CCAA proceedings was made after careful consideration of the Company’s financial position while evaluating all available alternatives and engaging in significant consultation with legal and financial advisors.”
Freedom reports that it needs CCAA protection due to its default under certain material operating agreements and the possibility that the Canada Revenue Agency will not renew its cannabis excise licence. The company says it is insolvent on its cash flow and balance sheets.
Freedom had initially sought, and the court established an initial stay of proceedings to August 8, 2024, providing Freedom Cannabis time to restructure its business, engage with key creditors and stakeholders, identify and assess potential restructuring options and review other strategic alternatives to maximize the value of the company for their stakeholders. That process has now been extended to August 18, 2024, and Freedom seeks to extend it again until August 28.
KPMG is the monitor.
Freedom is a privately owned company that has been operating in the Canadian cannabis industry since 2017. Its head office is located in Acheson, Alberta, where it employs around 100 people.
Freedom lists more than $17 million owed to a secured creditor and indebtedness of more than $9 million to three other parties. As of July 2024, it also owes $10,000 to the CRA for outstanding GST payments and $9.5 million in excise duty liabilities. The company’s total arrears owing to Health Canada are approximately $265,000.
An increasing number of cannabis companies in Canada have been seeking CCAA protection as the industry experiences significant price compression, high excise taxes, and increased competition. Such protection can provide an opportunity for companies to restructure their finances to address creditor concerns.
