BMO Financial cuts first major North American lending deal with cannabis firm
Bank of Montreal will provide $200 million in financing to Aurora Cannabis, a Canadian marijuana company, in what is believed to be the first major investment in the marijuana industry by a North American bank.
Aurora, of Edmonton, Alberta, said Tuesday that it will use the debt to finance its growth and expansion plans, which include M&A.
“Having successfully met all of BMO’s stringent risk assessment and other due diligence criteria to establish this facility reflects well on the maturity, progress and prospects of Aurora, as well as the quality and economic value of our production facilities,” Aurora CEO Terry Booth said in a press release. “This is by far the largest traditional debt facility in the cannabis industry to date.”
The marijuana industry has had a tough time getting access to bank accounts and services, even in places where it’s been legalized in one fashion or another. Marijuana is currently legal in Canada for medical use, and the country is set to formally legalize it in mid-October.
U.S. marijuana companies, however, are likely to continue to face uncertainty where access to banking is concerned. Because pot is still illegal at the federal level and banks must answer to federal regulators, most financial institutions shy away from serving the industry. Recent efforts to provide protection or clarity to banks serving the pot industry have failed to gain traction.
BMO did not provide a comment on the deal with Aurora. The company works in various aspects of the marijuana industry, including facility design, breeding and genetics research, cannabis and hemp production, and wholesale and retail distribution. Currently, Aurora deals in medical-use marijuana, although it will deal in both medical and recreational marijuana starting on Oct. 17, when Canada legalizes adult consumer use.
BMO’s deal with Aurora includes a $150 million term loan and a $50 million revolving line of credit. The company said that it has the option to request an additional $45 million in the term loan and that BMO would be providing another $5 million in financing.
Aurora said it expects to pay an interest rate in the mid-to-high 4% range over the life of the loans, which are set to mature in 2021. The debt was secured by mainly by Aurora’s production facilities.