Fire & Flower Holdings Seeks Creditor Protection Following Mounting Losses

TORONTO– Fire & Flower Holdings Corp. and its subsidiaries have taken a significant step in response to their financial struggles, as they have been granted an initial order for creditor protection by the Ontario Superior Court of Justice. The move comes after the Canadian cannabis retailer reported net losses exceeding 200 million Canadian dollars ($150 million) since 2018.

The Toronto-based company’s decision to file for bankruptcy under the Companies’ Creditors Arrangement Act (CCAA) is a clear indication of the ongoing challenges faced by players in the cannabis sector. Fire & Flower Holdings Corp. (OTCQX: FFLWF) and its subsidiaries have been working to secure additional financing to support their operations, and this latest development highlights the urgency of their financial circumstances.

The company, which had already enlisted the assistance of a financial advisor in May to explore various options, determined that seeking creditor protection under the CCAA was the most viable course of action. As of the end of March, Fire & Flower reported a dwindling cash reserve of $8.2 million and a negative working capital of $12.8 million. The company’s negative cash flow from operating activities in the first quarter stood at $2.6 million, while its accumulated deficit reached a staggering $314.3 million.

Under the initial order from the Ontario Superior Court of Justice, several key provisions have been put in place. These include a stay of proceedings to facilitate the establishment of an orderly process aimed at streamlining operations and maximizing stakeholder value. Additionally, a debtor-in-possession loan has been approved, and FTI Consulting Canada Inc. has been appointed as the monitor for the Fire & Flower Group.

Despite these measures, the company faces the need for additional funding to support its ongoing operations and short-term working capital requirements. To address this, an affiliate of Alimentation Couche-Tard Inc. has provided a bankruptcy financing loan worth C$9.8 million. However, given the relationship between Couche-Tard, the loaning company, and Fire & Flower, the loan is considered a related-party transaction under Canadian securities rules. To expedite the process and bypass the requirement for formal shareholder approval, the company will utilize an exception granted to shareholders without a significant stake in the company.

The Toronto Stock Exchange is anticipated to review the delisting of Fire & Flower (TSX: FAF) following this announcement. This bankruptcy filing marks a significant turning point for Fire & Flower, once a prominent player in Canada’s legal cannabis market. However, it serves as a stark reminder of the ongoing difficulties faced by businesses in the sector.