Canopy Growth Corporation has ceased funding BioSteel Sports Nutrition Inc. and BioSteel has commenced proceedings under Canada’s Companies' Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice.
Canopy Growth previously announced it was reviewing strategic options for the BioSteel business unit, including a potential sale. BioSteel represented approximately 60% of the company’s Q1 FY2024 adjusted EBITDA loss.
BioSteel’s decision to seek creditor protection means Canopy Growth will limit further funding obligations, consistent with Canopy Growth’s transition to an asset-light operating model and focus on its core cannabis operations.
Canopy Growth said ceasing funding of BioSteel and potential cash proceeds from selling BioSteel’s assets is expected to strengthen its financial position. In addition, with BioSteel's operating loss and cash burn eliminated, Canopy Growth said it expects to achieve positive adjusted EBITDA across its remaining business units exiting fiscal year 2024.
"Canopy Growth has marked yet another major milestone in our transformation plan, as while BioSteel's business has shown significant year-over-year revenue growth, and we believe the brand remains an attractive asset, it does not align with Canopy Growth's cannabis focused asset-light strategy,” said Canopy Growth CEO David Klein. “We have repeatedly demonstrated that we will take decisive action to enhance our profitability and ensure we are focused and positioned to be a leader in the North American cannabis sector.”
BioSteel has obtained an initial order from the Ontario Superior Court of Justice that provides for a stay of proceedings in favor of BioSteel and its two U.S. affiliates, BioSteel Sports Nutrition USA LLC and BioSteel Manufacturing LLC. It also appoints KSV Restructuring Inc. as BioSteel’s monitor.
The CCAA process will allow BioSteel to maximize the value of its assets through a court supervised sales process. Canopy Growth remains BioSteel Canada's largest creditor and shareholder and anticipates receiving its proportionate share of any recoveries in the CCAA process.
Since July 1, Canopy Growth said it has reduced its overall debt by approximately CA$349 million, with further reductions totalling approximately CA$95 million expected over the next two quarters. The company also announced plans to sell its Hershey Drive facility for CA$53 million. Upon the completion of the sale, Canopy Growth will have sold a total of seven properties for an aggregate gross amount of approximately CAD $155 million since April 1.
Canopy Growth also reported that it achieved cost reduction of CA$47 million in the first quarter of fiscal year 2024, bringing total cost reductions to CA$172 million since the beginning of fiscal year 2023. The company said it expects restructuring initiatives announced in fiscal year 2023 to deliver combined selling, general and administrative expense and cost of goods sold reduction of CA$240 million to CA$310 million by the end of fiscal year 2024.