Estimated reading time: 6 minutes
Key Takeaways
- AYR Wellness has secured a short-term bridge loan worth $50 million with a 14 % coupon.
- The credit is multiple-draw, giving management flexibility to tap funds only when necessary.
- Collateral is shared pari passu with existing senior lenders, keeping creditor priorities aligned.
- Proceeds support an asset-sale programme and underpin a wider restructuring support agreement (RSA).
- If milestones are hit, AYR could exit 2024 with a leaner balance sheet and improved growth prospects.
Table of Contents
Introduction
The regulated cannabis market rarely stands still, and multi-state operator AYR Wellness has again adjusted its capital stack to keep pace. On 12 April 2024 the company entered a senior secured bridge credit agreement designed to bridge liquidity needs while a larger restructuring unfolds. Below, we unpack the mechanics, motives, and implications of this move.
Inside the Senior Secured Bridge Credit
A bridge loan is, by definition, temporary. AYR’s facility carries three headline terms:
- Principal: $50 million
- Interest: 14 %
- Structure: multiple-draw term loan – cash is pulled only when required
“Staged draws give the finance team the power to match borrowing precisely with working-capital demands.”
How the Bridge Loan Is Secured
Lenders enjoy a two-layer safety net:
- First-priority liens over AYR Wellness assets
- A pari passu position with existing senior noteholders, ensuring equal ranking on repayment
Role Within the RSA
The bridge credit underpins the broader restructuring support agreement (RSA), which:
- Aligns major creditors and management on a common roadmap
- Keeps day-to-day operations funded
- Preserves enterprise value while balance-sheet changes are executed
The Take-Back Debt Facility
Running alongside the bridge loan is a “take-back” facility that converts select existing claims into new, longer-dated instruments. The benefit is two-fold: it injects immediate liquidity and stretches maturities, giving AYR breathing room to execute its turnaround plan.
Asset Sale Strategy
The bridge proceeds also finance an orderly asset-disposal programme. Maintaining operations during the sales process helps management:
- Secure fair valuations rather than accepting fire-sale discounts
- Channel sale proceeds directly into de-leveraging
Financial Covenants & Conditions
Key guardrails include:
- A minimum liquidity covenant – AYR must hold a pre-set cash buffer
- A commitment premium compensating lenders for swift funding
- An exit premium if the loan is repaid ahead of schedule
Implications for Financial Health
The facility affects the balance sheet in several directions:
- Delivers immediate liquidity that shields operations from cash crunches
- Adds a relatively expensive 14 % cost of capital
- Lets management draw funds only when the need is demonstrable
- Supports a restructuring path aimed at a more sustainable capital structure
Impact on Stakeholders
Creditors
- Collateral rights preserved through the pari passu arrangement
- Potential participation in the take-back facility alters claim profiles
- Improved transparency via RSA reporting obligations
Shareholders
- Some uncertainty while restructuring milestones unfold
- Possible equity dilution if fresh capital is later raised
- Prospect of long-term upside once leverage is reduced
Closing Thoughts
The senior secured bridge credit is a calculated step designed to steady AYR Wellness while its capital overhaul proceeds. If asset sales close on schedule and the RSA milestones are met, the company could emerge with a stronger balance sheet and clearer growth runway. To stay updated, keep an eye on official releases posted on the AYR Wellness investor page.
FAQs
What is a bridge loan?
A bridge loan is short-term financing that provides liquidity until longer-term funding or a key transaction is finalised.
How does the bridge credit influence AYR’s operations?
It supplies working capital so that retail stores, cultivation sites, and distribution channels can operate normally while restructuring and asset sales progress in the background.
What are the principal benefits for AYR?
Immediate liquidity, flexibility over draw timing, and an enhanced negotiating position with creditors all rank high on the list of advantages.
Is the 14 % interest rate excessive?
While costly, the rate reflects the risk profile of the cannabis sector and the short-term nature of the facility. Management views the expense as acceptable given the breathing room it provides.
Could shareholders face dilution?
Yes. Future equity raises or debt-to-equity conversions under the RSA could dilute existing holders, although the aim is to create longer-term value.
