Fitch cuts, then ups Canopy

Fitch Ratings said it downgraded the long-term issuer default ratings for Canopy Growth Corp. and 11065220 Canada Inc. to RD from CCC- reflecting the agreements with certain convertible noteholders that exchanged debt for common shares. Fitch also lowered the ratings for the senior secured term loan facility at Canopy and the co-issuer, 11065220 Canada to CCC+/RR2 from B-/RR1.

Certain convertible noteholders agreed to exchange C$12.5 million of notes into cash and about 24.3 million of Canopy common shares. Fitch said it considers the exchange distressed.

Subsequently, the agency reassessed and upgraded the IDRs to CCC- post-completion of the exchange.

“The post-exchange IDR of CCC- reflects Canopy's current liquidity position including actions taken to reduce the high cash burn rates and recent asset sales and the uncertain path to profitability due to execution risks around its operating strategies. Fitch could take further negative rating actions if Canopy pursues actions that Fitch considers a distressed debt exchange per its criteria or the liquidity headroom becomes further diminished,” the agency said in a press release.

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