Aurora lines up $250M deal with BMO in milestone for pot industry

Aurora Cannabis Inc. announced TORONTO Tuesday that it has lined up a debt deal worth as much as $250-million with the Bank of Montreal, marking another milestone for Canada’s marijuana industry.

Edmonton-based Aurora said it agreed to a debt facility with the bank that will be made up of a $150-million term loan and a $50-million revolving credit facility. According to a release, both tranches will mature in 2021.

Aurora, however, can also request an increase of up to $45 million more to the term loan, subject to agreement by BMO, after the recreational legalization legislation takes effect in October.

BMO will provide up to $5 million in other credit as well, the release said. Closing of the arrangement is still subject to “final” due diligence and the satisfying of some conditions.

But Terry Booth, chief executive of Aurora, said in the release that the deal “is by far the largest traditional debt facility in the cannabis industry to date.”

“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,” Booth said. The debt deal could also signal a sea change in financing for Canada’s cannabis sector. Thus far, most firms in the industry have generally had to bankroll their operations with issues of shares and convertible debentures, not using traditional loans and debt financing.

“This is a game-changer in the sector,” said Cam Battley, Aurora’s chief corporate officer. “It’s the cannabis industry grown up and operating on a new level.”

Glen Ibbott, chief financial officer of Aurora, said in the release that “the shift to traditional debt financing is significant.”

“Our cost of capital continues to decrease, providing us a distinct competitive advantage as we execute on our growth strategy,” Ibbott added. “The non-dilutive nature and attractive pricing are consistent with Aurora’s commitment to generating shareholder value.”

The debt deal with Aurora marks a deeper foray into cannabis financing for BMO, which appears to be the most willing of Canada’s Big Six banks to dive into the sector. Prior to the Aurora deal, BMO Nesbitt Burns Inc. had recently co-led a $500-million offering of convertible notes for rival cannabis company Canopy Growth Corp.