(This is a developing story that will be updated.)
Struggling Canadian cannabis producer Canopy Growth Corp. is ceasing funding of its BioSteel subsidiary and plans to conduct a court-supervised sale of the brand and its property, the Ontario-based company said Thursday.
BioSteel, a popular sports nutrition and hydration brand, also obtained an initial order for creditor protection under the Companies’ Creditors Arrangement Act (CCAA) from a Canadian court, according to a Canopy news release.
Entering CCAA proceedings allows BioSteel to conserve cash, and effectively puts the business “into hibernation to preserve its assets,” Canopy’s said in its announcement.
“BioSteel’s application for and entry into the CCAA process was commenced as BioSteel no longer has access to funding for the brand which continued to generate negative operating cash flow,” Canopy said in the news release.
In the fiscal year 2023, covering April 2022 through March 2023, BioSteel generated 69.6 million Canadian dollars ($51.7 million) in sales, more than double the previous year’s CA$34.6 million in sales.
However, the cost of goods sold for the BioSteel segment outran the brisk sales growth, coming in at CA$110.3 million in the same period, for a deficit of CA$40.6 million.
BioSteel leases a fully utilized facility in Verona, Virginia.
“The decision to seek creditor protection was made after careful evaluation of BioSteel’s financial situation and all available alternatives following consultation with its legal and financial advisors and a determination that a court supervised sale process is in the best interests of BioSteel and its stakeholders,” Canopy said.
The initial order provides for a stay of proceedings in favor of BioSteel and its two American affiliates, BioSteel Sports Nutrition USA and BioSteel Manufacturing.
BioSteel’s board of directors will remain in place, the release noted.
Canopy said BioSteel will be responsible for the sale process under the supervision of the CCAA court.
BioSteel plans to fund the CCAA process from cash on hand and does not expect to require additional financing during the sale process.
The sports nutrition brand also said it intends to seek approval of a sale and investment solicitation process (SISP).
“BioSteel intends to use this process to build on the work it undertook prior to the filing to identify a purchaser on an efficient basis,” according to the release.
If approved by the CCAA court, the SISP will be administered by BioSteel with the assistance of its financial adviser, Greenhill & Co. Canada, under the oversight of the monitor, KSV Restructuring.
Shares of Smiths Falls-headquartered Canopy are traded on Toronto Stock Exchange and Nasdaq.
Matt Lamers can be reached at email@example.com.