National Australia Bank (NAB) has written off more than A$54 million owed to it by Cann Group as the grower heralded a refinancing deal with its key lender as a “major step forward” in strengthening its balance sheet.
After months of negotiations, NAB has accepted $15.3m of the $70m it is owed, resulting in a “debt forgiveness” of $54.6m.
The agreement effectively saves the company from becoming insolvent.
NAB was owed $53.2m from the construction of Cann Group’s Mildura facility and $15.6m in working capital, both of which were due for settlement on September 30.
Sources said the bank had long-since resigned itself to losing the lion’s share of its investment.
“The decision was whether to write everything off and send Cann into liquidation or take what they could get and move on,” one source said. “They chose the second option.”
To fund the settlement, a second, unidentified private lender will provide $9m to Cann Group on top of the $5.5m it has already loaned the company.
The $14.5m total must be repaid in late 2027, with interest of 9.5% payable monthly. The agreement will also see the lender receive 3% per annum capitalised interest, payable at the maturity date, along with a 2% facility fee, also capitalised and due on maturity.
Cann Group said the refinancing will reduce its annual interest payments from $5.2m to $1.8m.
Observers said the outcome was not only good for the company, but for the industry as a whole.
In addition to the refinancing package, Cann Group has embarked on a capital raise in a bid to swell its coffers by another $9m.
The company said it has received firm commitments of $6.5m in a share placement, with a share purchase plan (SPP), which launches today, seeking to raise $2.5m.
Proceeds from the exercise of options under the placement and SPP could generate a further $31.3m, it added.
Cann Group chief executive and managing director Jenni Pilcher said: “We are very pleased to have reached this landmark agreement, which represents a major step forward in strengthening our balance sheet and positioning Cann for sustainable growth.
“The settlement with our major financier eliminates approximately $70m of their debt for a payment of $15.3m, providing a clean foundation for the company’s next growth phase.
“We are equally encouraged by the continued support from our subordinated lender and the additional $9m capital raising, which together provide the flexibility required to execute on our strategy.”
She said Cann Group now has a “clear path” to generate positive earnings in FY25 of between $0.3m and $0.7m, and to deliver projected revenue of $17m, approximately 50% higher than FY25.
The debt restructuring came as the company reported receipts from customers of $3.12m in the first quarter of FY26, up from $2.8m in the previous quarter, but down from $3.6m in Q1 FY25.
Net cash outflows totalled $198,000 – a 92% improvement on the previous quarter – with August delivering a positive EBITDA result.
Pilcher said: “This quarter we’ve delivered a near break-even result for free cash flow and achieved our first EBITDA positive monthly result. Both outcomes are the result of an increase in bulk dried flower sales and continued cost savings being realised across the business.”
Meanwhile, financial services executive Mike Ryan, who helped with the financing, will become Cann Group chair, replacing interim chair Doug Rathbone who will revert to his non-executive role.
Rathbone said: “This agreement is the result of an incredible and committed effort by our CEO and MD Jenni Pilcher.
“Jenni was well supported by Mike Ryan who will now join the board as chair, bringing with him a wealth of experience, strong governance capability and a clear vision for the future direction of the company.
“Together, Jenni and Mike will provide the leadership strength and continuity needed to guide the organisation through the its next phase of growth and development.”
The first tranche of the share placement will see the issue of 120 million shares at 1.15c per share – raising $1.3m, before costs – with a second tranche of 445 million shares at the same price raising $5.1m.
Cann Group said it has received firm shortfall commitments from institutional investors for $2.5m under the share purchase plan.
Someone at NAB must surely be getting fired over granting this loan….