(Bloomberg) – If it is like most companies at the end of the losing and the statue, Shawazz can turn into the bankruptcy court in the United States to keep their creditors while re -negotiating it. But unlike most companies, its product – marijuana – is still illegal in the eyes of the federal government.
This defect will make it difficult for Shawazz and other cannabis companies to win concessions from the lenders, just as it was a wave of debt that the industry borrowed in recent years to expand in the states where the weeds are legal due. The largest companies, which operate in more than one state, have up to $ 6 billion of debt that ripens next year, according to Beau Whitney, the chief economist in Whitney Economics, who specializes in the cannabis market.
The account comes because the industry has failed to convert legal herbs into reliable profits. In 2022, more than 42 % of merchants reported a profit, according to Witti’s survey. By last year, the number decreased to about 27 %. Some of those who cannot unite fail and get out of work. Many will have to re -financing their debts at higher interest rates and arduous contractual covenants.
And Whitney said: “There is a huge debt bubble that can have a significant negative impact on hemp industry if it is not eaten.” “The re -financing of this course will be at much higher interest rates and companies will not have a cash flow to manage it.”
Shawazz, headquartered by Colorado, rented a consultant to help her know how to restructure the debts she took while opening a series of clinics in two states, according to people familiar with the situation. People who asked not to know a special issue said. However, the exercise should occur outside the court due to the federal ban.
Nearly half of the United States clarified marijuana, while a number of others canceled or allowed medical purposes. It is still completely illegal in only four states. About 79 % of the US population lives in a province with at least one clinic, according to the Pew Research Center. Whitney said that the legal cannabis companies employ more than 450,000 people and sold more than $ 30 billion in the past year.
Federal law prevents people from transferring marijuana through state lines and treats it as a dangerous drug in the first table. Generally, public prosecutors do not take measures against individual consumers, but the laws still limit the banking services for the cannabis industry. The American trustee, the International Banking Energy Agency in the United States, has succeeded in preventing companies from providing protection of Chapter 11.
The people said that Shawazz, whose official name is Medicine Man Technologies Inc. , I participated in Oppenheimer & Co. Goodwin Proquster as a legal advisor for her conversations. They added a group of the company’s creditors with Paul Hastings.
The negotiations come at a time when Shawazz received a virtual notice in December due to the delay in its audited financial reports, according to general disclosure. The company had to switch independent auditors and reformulate the annual results of 2022 and 2023 after discovering accounting errors. In July, Shawazz managed to retract a $ 15 million loan with Altmore Capital and a $ 17 million permission with Reynold Greenp & Associated, who was scheduled to be this month, according to general disclosure.
The people said that among its options, Shawazz is looking forward to obtaining additional capital and may seek a lower level of exchange, which may reduce shares.
“It was this way for years,” said Hillary Berkin’s lawyer of HUSCH Blackwell Law Law. “These lenders have the upper hand. The conditions granted to hemp companies are exhausting and Draconian. It is not a friendly environment.”
Last year, the US Department of Justice began the marijuana classification process as the essence of the third table, and less dangerous, one of the basic goals of the industry because it allows cannabis companies to deduct regular work expenses and pay “hundreds, if not thousands, who said Aaron Smith, the co -founder of the National Assembly. In the industry of cannabis, companies are in profitability.
Pam Bondi, President of President Donald Trump, refused to say during her confirmation session last month whether to cancel this process. Industry works for years to remove the largest possible number of federal obstacles, with limited success, although the majority of Americans prefer to legalize.
Colorado and Washington became the first state of entertainment marijuana for about ten years, as she launched a wave of small beginnings run by enthusiastic, but inexperienced entrepreneurs. More countries have also been legalized, either for entertainment use or as a drug, investors and the number of licensed agents and dispensaries exploded. The total sales grew steadily, with increased revenues when the epidemic is over. This is when companies have been uploaded to the debt that will happen next year.
Bricken, the Marijuana lawyer who has advised customers from the early days of legalization, said. Brickne said that there is only a handful of lenders who are preparing to invest in this industry, noting that two of the largest Chicago Atlantic Group and Altur Capital Investment Company.
“I left all the stupid money,” she said.
Chicago Atlantic representatives did not want to request a comment. Tamor Capital refused to comment. The messages that Shawazz left, as well as with Obenheimer, Godwin Brookter and Paul Hastings have not been returned.
Hemp companies have struggled to compete with unlicensed merchants, who can undermine legal sales because they do not pay a license, compliance with regulations, or to face any taxes. The United States witnessed about 44 billion dollars in illegal sales last year, according to the tracker of the Bdsa cannabis market.
And Whitney said: “Unless there is a federal intervention, through reform, the industry is on the verge of collapse and large companies will be placed from outside the cannabis industry to take over, in exchange for penalties on the dollar.”
-With the help of Fiona Radford.
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