The court documents show that Tokyo Smoke has more than C$90 million worth of debt left on the books.
Longtime Canadian cannabis retailer Tokyo Smoke announced it has begun a court-supervised sale process as part of its restructuring efforts.
The company entered into a share subscription agreement with its parent, TS Investments Corp., which will put up all of Tokyo Smoke’s shares for about C$77 million, plus assumed liabilities, ahead of auction. The “stalking horse bid” sets a bottom for the sale.
The move comes after Tokyo Smoke recently closed 29 stores as it sought creditor protection. The company still maintains 167 locations across Manitoba, Newfoundland and Labrador, Ontario and Saskatchewan.
“Tokyo Smoke commenced restructuring proceedings under the CCAA to align its operations with current market and regulatory conditions, which have significantly changed since the initial licensing regimes were introduced,” the company said in a statement.
Alvarez & Marsal Canada is overseeing the CCAA proceedings as the court-appointed monitor. Interested parties have until Oct. 21 to submit non-binding letters of interest, with a Nov. 11 deadline for binding agreements.
The company said it intends to “exit from CCAA protection as a stronger business, better positioned to continue providing premium products to its customers over the long-term, while continuing to provide jobs to its dedicated employees across Canada.”
Tokyo Smoke said that its retail locations, online business and loyalty program would continue to operate normally during the process.
The development follows wider rightsizing in Canada’s cannabis sector. Research firm Ibis World projects a 1% revenue contraction for the Canadian cannabis market in 2024, citing market saturation and reduced novelty of legal cannabis.
High Tide’s Omar Khan recently noted in the National Post that many legal cannabis companies are filing for bankruptcy, suggesting the Canadian government has “washed their hands of the industry they helped to create.”
Canopy Growth originally acquired Tokyo Smoke in 2018 for about C$250 million. In early 2023, it was sold to OEG Retail Cannabis, a subsidiary of OEG Inc., for an undisclosed amount.
Court documents show that Tokyo Smoke has significant secured debt, with Bank of Montreal owed C$38.6 million and TS Investments Corp. owed C$52.5 million.
Major unsecured creditors include Newfoundland Labrador Liquor Corp. (C$351,152), National Cannabis Distribution (C$339,047) and The Cadillac Fairview Corp. (C$370,688).
[[{“value”:”The court documents show that Tokyo Smoke has more than C$90 million worth of debt left on the books.
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