CNPOF - RIV Capital Stays On Path To Crossover To U.S. Cannabis
RIV Capital Inc. (TSX: RIV) (OTC: CNPOF) released its financial results for the fourth quarter and fiscal year ended March 31, 2021, which proved to be a very transitional period for the company. Riv reported operating income (before equity method investees and fair value changes) of $0.7 million for the quarter. The company said that the operating income primarily consisted of royalty and interest income from its royalty and debenture agreements with Agripharm Corp., Greenhouse Juice Company, Radicle Medical Marijuana Inc., and Tweed Tree Lot, as well as lease income generated from the company’s lease agreement with Tweed Tree Lot.
Riv also delivered a total comprehensive income of $64.8 million for the quarter, versus a total comprehensive loss of $36.8 million for the same period last year. The net change in the fair value of financial assets that are reported at fair value through other comprehensive income was an increase of $86.3 million , primarily driven by the positive change of $109.4 million in the fair value of the company’s exchangeable shares in TerrAscend. This was partially offset by a negative change of $7.6 million in the fair value of the Company’s investment in Vert Mirabel common shares, among other items.
“Our quarter and fiscal year were highlighted by the closing of our milestone transaction with Canopy Growth, paving the way for RIV Capital to launch into the U.S. market,” said Narbé Alexandrian, President and CEO, RIV Capital . “This transaction returned several multiples on invested capital and provided us with the strategic flexibility needed to pivot our business model. With a revitalized balance sheet and our new strategy in place, we have been actively sourcing opportunities in the world’s largest and most exciting cannabis market, and continue to believe that this next chapter will create significant value for our shareholders in the quarters to come.”
Canopy Transaction
On February 23, 2021 , Riv sold certain financial assets held in TerrAscend Corp., TerrAscend Canada Inc., The Tweed Tree Lot Inc., and Les Serres Vert Cannabis Inc. to Canopy Growth for $118.4 million in cash, approximately 3.65 million common shares of Canopy Growth, and the cancellation of the multiple voting shares and subordinated voting shares of the company held by Canopy Growth. As a result of the completion of the CGC Transaction, the Company’s dual-class share structure was eliminated.
The proceeds represented a substantial return on invested capital for the company. The total fair value of the consideration received was measured at $335.9 million upon closing of the CGC Transaction. Riv said its financial results for the quarter reflected the impact of fair valuing the disposed of assets based on the fair value of the consideration received for each asset, as well as the derecognition of the disposed of assets and the corresponding recognition of the consideration received.
Eddie Lucarelli , Chief Financial Officer, said, “With the CGC Transaction complete and the PharmHouse Credit Facility fully settled, our rejuvenated balance sheet puts us in an advantageous position to capitalize on the growing momentum in the U.S. cannabis market.”
PharmHouse Update
Riv noted that after the quarter ended it closed on its previously announced plan for PharmHouse to sell its greenhouse facility and certain equipment located at the facility. Riv made a payment of $25.0 million to the lenders of PharmHouse’s $90.0 million non-revolving syndicated credit facility. As a result of this payment, Riv’s liability in respect of the PharmHouse Guarantee, which had been estimated to be $32.5 million as of December 31, 2020 , was reduced by $25.0 million . With the PharmHouse sale closed, PharmHouse used the net proceeds to reduce the amount owed under the Credit Facility. Riv said the PharmHouse Credit Facility has now been terminated and canceled. Riv said it is entitled to any cash available for distribution upon termination of the CCAA proceedings.