We have assumed that both tranches of debt are drawn simultaneously as this assumption only makes a modest difference in the calculated cost. Effective cost is calculated by subtracting all warrant values, OID, and fees from the loan proceeds and calculating a Yield to Maturity using the discounted proceeds. We have calculated an approximate incremental addition to the effective cost for each deal feature. We calculate a 19.0% effective cost of the BAMM loan.
Note the striking difference between BAMM's effective cost and the 6.75% rate (prime plus 3.5%) for the Tilt Holdings revolving credit closed this week. What accounts for this gap? The main difference is that the Tilt deal is a standard asset-based revolver of Tilt's Jupiter subsidiary (a non-plant-touching and, therefore, federally legal business). The second big reason is that Tilt is significantly larger, with a $175M market cap compared to BAMM's $39M.
We Although the current transaction increases BAMM's leverage (debt to market cap increases from .07x to .36x), Body and Mind is still an excellent credit. Below we show the credit rankings and summary statistics of the top 5 ranking credits from the 22 U.S. cultivation and retail companies we track in the Viridian Credit Tracker. Body and Mind ranks as the second strongest of the group, maintaining this relative ranking proforma for the financing. The Viridian Credit Tracker uses four groups of variables to rank credit quality: Liquidity, Leverage, Profitability, and Size. We utilize 11 different financial statement and market-based variables to generate the rankings, and only a selection is shown below.
Viridian Credit Tracker Rankings for U.S. Cultivation & Retail Companies with less than $200M Market Cap