Viridian Cannabis Credit Rankings Prioritize Liquidity – Acreage Holdings (OTC:ACRDF), TerrAscend (OTC:TRSSF)
Over the past two weeks, TerrAscend TRSSFVerano VRNOFand Area ACRDF secured new credit agreements with very low interest rates, demonstrating that Tier 1 MSOs still have strong, albeit costly, access to credit markets.
Small public and private companies have limited access to debt, and rates are likely to be high and contain equity for many of these companies. Businesses under liquidity pressure, including maturing debt, may be subject to effective costs of up to 30%.
Therefore, we are monitoring liquidity more carefully and have recently adjusted the Viridian Credit Tracker Scoring model to give a higher weight to this factor.
The companies on the chart are the 18 US grow and retail companies in the Viridian database with market capitalizations between $10M and $200.
The green bars in the graph show the Viridian credit score for each company ranked in ascending order of credit quality.
The model uses 11 financial and market-based variables to assess: four aspects of credit quality: liquidity, leverage, profitability and size.
The Viridian credit model is particularly valuable for companies of this size because ten out of eighteen do not have analyst coverage.
The purple line shows the relative ranking on our liquidity score, which takes into account the company’s liquid assets, free cash flow consumption, and short-term liabilities, including debt maturities. Companies with liquidity below 12 will likely need additional funding over the next year. Ten of the eighteen companies on the chart posted negative operating cash flow in the last quarter.
The orange line shows the Viridian Leverage rank. Rankings below ten typically coincide with debt-to-market capitalization metrics above 3x, which we consider indicative of financial stress.
Viridian’s multi-factor model takes into account the trade-offs inherent in each company’s financial situation. For example, MariMed CSE obtains a low level of liquidity and will likely require short-term funding; however, it has one of the lowest overall leverage ratings, giving us confidence that it should be able to secure funding.
The tight capital market environment makes it essential that debt and equity investors closely monitor credit quality, and the Viridian Credit Tracker model can be a valuable tool.
The Viridian Capital Chart of the Week highlights key investment, valuation, and M&A trends from the Viridian Cannabis Deal Tracker.
The Viridian Cannabis Transaction Tracking provides the market insights that cannabis companies, investors, and acquirers use to make informed decisions about capital allocation and M&A strategy. The Deal Tracker is a proprietary news service that monitors capital raising and M&A activity in the legal cannabis, CBD and psychedelic industries. Each week, the Tracker aggregates and analyzes all completed deals and segments each one based on key metrics:
Deals by industry sector (to track the flow of capital and M&A deals by any of 12 industries – from culture to brands to software)
Deal structure (equity/debt for capital raises, cash/stock/compensation for M&As) Status of company announcing deal (public vs. private)
Agents of the Operation (Issuer/Investor/Lender/Acquirer) Main terms of the operation (Pricing and Valuation)
Key deal terms (deal size, valuation, price, warrants, cost of capital)
Transactions by issuer/buyer/seller location (to track capital flow and M&A transactions by state and country)
Credit ratings (leverage and liquidity ratios)
Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed over 2,500 fundraisings and 1,000 M&A deals totaling over $50 billion in total value.
The previous article comes from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.