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In a remarkable turn of events, a significant acquisition is on the horizon as Tropics LP, a secured lender and stalking horse bidder, is poised to acquire the prominent cannabis company, Skymint. This acquisition comes in the wake of a pivotal decision by Judge Joyce Draganchuk of the Circuit Court for Ingham County, Michigan, who gave the green light to this transformative sale.

Rejuvenation for Skymint and a Triumph for SNDL

The purchase agreement, inked between Skymint and Tropics subsidiary Skymint Acquisition Co., encompasses the retail leases of 21 dispensaries, which had garnered an impressive $68 million in revenue by September 2023, according to SNDL's recent press release.

Zach George, the CEO of SNDL, expressed his optimism about this landmark event, stating, "This key milestone in Skymint's ongoing restructuring represents another successful navigation of a complex process. The sale order brings greater certainty, enables management at Skymint Acquisition Co. to focus on serving Michigan consumers and creates tangible U.S. optionality."

The regulatory approvals for the transfer of cannabis licenses are expected to begin in early 2024, as SNDL anticipates a promising future for this acquisition.

A Tale of Resilience and Transformation

The relationship between Tropics and Skymint traces back to September 2021, when Tropics provided Skymint with a $70 million secured loan. Despite a promising start, Skymint faced challenges, with the purchase of cannabis retailer 3Fifteen expanding its presence in Michigan. By March 2022, Skymint found itself in default. Nevertheless, Tropics demonstrated resilience by waiving the default and extending a $5 million bridge loan to support Skymint.

Subsequently, in November 2022, another default transpired, prompting Tropics and Skymint to enter into a forbearance agreement. Tropics extended further support by loaning Skymint an additional $6.25 million.

By February 2023, Skymint grappled with a total debt of $125 million and lease obligations of $130 million. In response to these challenges, Tropics petitioned the Circuit Court for Ingham County, Michigan, to appoint a receiver for the company. Gene Kohut of Trust Street Advisors LLC was duly appointed as the receiver in March. He orchestrated an auction, with Skymint Acquisition Co. as the stalking horse bidder, which has ultimately led to this remarkable acquisition.

A Union of Pioneers in the Cannabis Industry

Tropics, an affiliate of SunStream Bancorp Inc., represents a joint venture co-sponsored by Sundial Growers Inc. and SNDL. Notably, SNDL stands as Canada's largest non-state-run cannabis and liquor retailer, boasting a vertically integrated cannabis business. The organization has made extensive investments in the North American cannabis industry. The joint venture, SunStream, has committed over $450 million across seven companies since its inception.