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Streetwise Before BMO led stock sale for marijuana grower, CIBC lent money

Marijuana grows at a MedReleaf facility in Markham, Ont., in January, 2016.

Nathan Denette/The Canadian Press

Mystery solved: Canadian Imperial Bank of Commerce led a $20-million credit facility extended to MedReleaf Corp. last April to help the cannabis company grow.

Public filings describing the loan's terms did not disclose the chartered bank involved in the deal, and both MedReleaf and CIBC previously declined to confirm its identity. But two days after Bank of Montreal announced it co-led a $200-million equity financing for Canopy Growth Corp., MedReleaf's chief executive revealed CIBC as one of its bankers.

The debt, which is partially syndicated to Farm Credit Canada and matures in April, 2020, consists of a fixed $10-million facility, which is fully drawn, and a revolving $10-million credit line. The initial borrowing cost was 4 per cent a year. The money could be spent on either funding the expansion of MedReleaf's building in Bradford, Ont., repaying other debt or for general purposes.

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Canada's largest banks are still hesitant to do business with cannabis companies. The banks say they are assessing companies on a case-by-case basis and reviewing their policies as pressure builds to engage with a rapidly expanding industry. But at the same time, these businesses crave the validation and credibility boost that comes from having a relationship with a big bank. And after Canopy drew attention as a first mover through its bought deal with BMO, MedReleaf elected to publicize its ties to CIBC.

MedReleaf CEO Neil Closner says the company reached out to his bankers at CIBC after the Canopy deal was disclosed, telling them: "BMO is stealing all of your thunder. You've been in this business for months, and BMO is getting credit for being the first bank. Isn't it time you guys came out?"

MedReleaf, which has a market cap of $2.2-billion, currently has business chequing and savings accounts with CIBC as well as Toronto-Dominion Bank.

Through a spokesperson, CIBC declined to comment Friday. Multiple times as early as last August, The Globe and Mail asked the bank to confirm that it had indeed lent money to MedReleaf, but the bank declined. At that time, Mr. Closner said he could not name it, either.

"They didn't want every producer in the country knocking down their doors because their decision, as they told us, was really a company-specific decision based on the fact that our financials were so strong," Mr. Closner added. "CIBC was, like all the banks, initially reluctant, but as they dug into our financials, they started to gain increasing comfort that, frankly, MedReleaf had a real business and a business model that was working."

After BMO announced its deal with Canopy, the dynamic between banks and cannabis companies appeared to be changing.

"It's woken up a few banks," Mr. Closner said. "And they are now strongly considering how they want to enter the market."

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