SUNDRE – Candre Cannabis went into receivership last week after the company defaulted on a nearly $24-million debt.
Alvarez & Marsal Canada Inc. assumed ownership of Candre’s assets with the exception of “excluded assets" on March 6.
According to a Court of King’s Bench of Alberta affidavit signed by Sveinung Svarte on behalf plaintiff Enzio Holdings Ltd. and date-stamped Feb. 27, 2023, the defendants – Candre Cannabis Inc., Frondis Holdings Ltd., Calyptra Cultivation Inc, and Jasmine Ventures Ltd. – were as of Dec. 31, 2022 indebted in the amount of $23.7 million.
Opening its doors in the summer of 2019, Candre Cannabis, has a registered office in Sundre and held a Health Canada licence under the Cannabis Act and Cannabis Regulations to produce and sell cannabis.
The company also held supply agreements with, among others, the Alberta Gaming, Liquor and Cannabis Commission as well as the Ontario Cannabis Retail Corporation.
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Svarte cited in his sworn affidavit that ongoing challenges within the nascent cannabis industry that was legalized in 2018 became insurmountable for Candre.
“The cannabis industry in Canada is facing numerous financial and operational challenges, including significant regulatory compliance costs, black market competition, and over supply issues,” reads a portion of his statement.
“I am aware of a number of Canadian cannabis companies that have made insolvency filings in the last few years.”
Over supply has resulted “in significant competition and price compression” while consumer demand at the retail level is depressed “in part due to the persistent illegal cannabis market” while regulatory delays and past pandemic store closure exacerbated manufacturing and retail challenges, the stated elaborated.
Multiple attempts to contact Jesse Beaudry, Candre chief executive officer, for comment were not successful.
The sworn affidavit of Svarte, from Calgary, states on behalf of the lender that the plaintiff is satisfied they possessed enough information to seek an application for the appointment of a receiver and manager over all current and future assets, undertakings and property of the borrower.
Further elaborating, the order specifically states the receiver “shall not take possession of, nor be deemed to take possession of, any of the debtor’s assets for which any permit or licence is issued or may be issued in accordance or connection with” controlled substances legislation including the Cannabis Act.
Outlined among the 298-pages of documents is a history of the loan that after being initially approved was later amended three times.
The borrowers had provided a general security agreement dated May 11, 2018 in respect to the amounts owed to the lender, and the original loan agreement for a principal amount of $18.6 million was dated Nov. 12, 2019.
A first letter amending the agreement was dated June 30, 2020, followed by a second letter amending the agreement dated Dec. 31, 2021 and eventually a third dated Jan. 1, 2022.
In January 2023, the lender issued a notice of default and demand for payment.
“Despite the lender’s demands for repayment of the indebtedness, the borrower and the guarantors have failed or neglected, and continue to fail or neglect to repay the indebtedness, and they are default of their obligations,” reads a portion of the sworn affidavit signed by Svarte, who also disclosed his position as one of the borrowing directors.
Correspondence from law firm BD&P that was dated Jan. 19, 2023 to the attention of Beaudry, in part states that, “On behalf of Enzio, we hereby demand repayment of all amounts due” representing a total of $23.1 million as of Jan. 1, 2023 plus accrued and accruing interest and legal costs.
Candre was also said to owe approximately $1 million in outstanding taxes, and reportedly “will not have funds available to it to make its payroll obligations to its employees in the near future.”
