Schwazze Nears Debt Restructuring Echoing Ayr Wellness Strategy

DENVER – Schwazze approaches a debt restructuring that closely follows the path set by Ayr Wellness, as financial strains push more companies in the sector toward creditor-driven asset reallocations.

Ayr Wellness Inc., a Miami-headquartered MSO, signed a Restructuring Support Agreement on July 30 with holders of its senior notes, paving the way for asset sales and new funding. Senior noteholders committed to a $50 million bridge loan at 14% interest to support operations during the process, which involves Article 9 foreclosure sales of assets in Florida, Ohio, Pennsylvania, Nevada, New Jersey, and Virginia. Creditors plan to credit bid for these properties, canceling part of the debt and converting the rest into equity in a new company, while non-selected operations wind down or sell separately. This setup avoids federal bankruptcy, unavailable to Cannabis firms under current laws, and includes layoffs at facilities like those in Massachusetts to cut costs.

Schwazze finalizes a similar arrangement where senior creditors, including those led by Chicago Atlantic, advance $65 million in fresh capital: $45 million to settle seller financing and $20 million for working capital. Lenders will pick top-performing assets from its network of over 60 locations for a credit bid under Article 9 of the Uniform Commercial Code, creating a deleveraged new entity focused on viable operations while dropping unprofitable ones. Remaining sites could face repossession by other creditors or operate independently. Common and preferred equity holders stand to lose all value in the transition. The move addresses defaults on restructured debt earlier this year and a leverage burden exceeding $200 million.

These transactions mark a shift in Cannabis debt workouts. Prior deals, such as those for 4Front Ventures, Gold Flora, and StateHouse Holdings, relied on receiverships that upheld claim priorities but often sold assets piecemeal, failing to capture full going-concern value. By contrast, the Ayr and Schwazze approaches leverage Article 9 credit bids to preserve and transfer strong businesses to creditors, isolating weaker segments. This tactic draws from liability management exercises typical in high-yield bond markets, where select lenders enhance their recoveries at the expense of others.

Industry-wide, operators confront nearly $6 billion in maturing debt by 2026, compounded by tight credit and regulatory hurdles. While such restructurings may stabilize participants like Schwazze and Ayr in the short term, they highlight persistent capital access issues.

Creditor recoveries, potentially estimated in forthcoming reviews, will largely depend on asset performance post-transfer. However, this model may become the standard until broader policy changes ease funding constraints.