Kandice Hughes helps a customer at Star Buds in Commerce City on Dec. 20, 2024. (Photo by Kevin Mohatt/Special to The Denver Post)
The Denver-based parent company of Star Buds dispensaries could partly be run by a receiver as it faces accusations of missed loan payments, defrauding a lender, and threatening to close several dispensaries and cultivation locations in order to avoid repaying debts.
“This is ongoing litigation, so we are somewhat limited in what we can share, but what we would tell you is that we strongly disagree with the characterizations and the allegations made in the complaint and we intend to vigorously defend ourselves through the appropriate legal channels,” Sean Mansouri, the head of investor relations for Schwazze, told BusinessDen.
“There are a lot of claims that were made — intentionally devaluing collateral, this and that — but we acted in good faith at all times in our negotiations, so we vehemently deny that.”
Altmore Capital, a major lender to cannabis companies out of Washington D.C., is suing Schwazze in Denver District Court. Formerly known as Medicine Man Technologies, Schwazze owns 30 dispensaries in Colorado, four grows and a manufacturing plant in Pueblo.
Altmore says that it loaned $15 million to Schwazze in 2021 and is still owed $11.1 million. That makes it a junior lender, since the investment firm Chicago Atlantic loaned $95 million.
After missing a loan payment in early March, Schwazze told Altmore that it was restructuring its debts into good collateral and bad collateral and Altmore’s collateral — four dispensaries, a grow and the Pueblo plant — would be labeled bad collateral unless Altmore agreed to reduce the amount it is owed by more than 70 percent, according to Altmore’s lawsuit.
“With respect to repaying the loan, look, we have been very public about being in a broader financial and strategic review of the business, including efforts to restructure our capital base,” Mansouri said. “So, during that process, we have had to make strategic decisions about how and when to allocate resources, including the timing of certain payments.”
“Ultimately, we are going to focus on the long-term stability of the business,” he added.
Altmore claims that Schwazze has, “on multiple occasions, threatened that it would devalue Altmore’s collateral by shutting down” the four dispensaries and other properties. The lender’s lawsuit does not say where the four dispensaries and the cultivation site are.
Meanwhile, at the plant in Pueblo, Schwazze has removed a machine for pre-rolling joints, “a deliberate attempt to remove millions of dollars of revenue and EBITDA from the collateral,” according to Altmore’s lawsuit, which claims that move was a fraudulent transfer.
Altmore says that Schwazze has admitted its debts surpass its assets. So, the lender wants a receiver to oversee the company’s restructuring, to protect Altmore’s interests.
Altmore’s attorneys are Claire Wells Hanson and Darren Kaplan with Clark Hill in Denver.
“The lawsuit has not impacted our operations or any kind of commitment to customers,” says Mansouri with Schwazze investor relations. “We are continuing to operate in the ordinary course, continuing to serve both patients and recreational customers, being good stewards of our suppliers and supporting our employees across Colorado and New Mexico.”
Kandice Hughes helps a customer at Star Buds in Commerce City on Dec. 20, 2024. (Photo by Kevin Mohatt/Special to The Denver Post)
The Denver-based parent company of Star Buds dispensaries could partly be run by a receiver as it faces accusations of missed loan payments, defrauding a lender, and threatening to close several dispensaries and cultivation locations in order to avoid repaying debts.
“This is ongoing litigation, so we are somewhat limited in what we can share, but what we would tell you is that we strongly disagree with the characterizations and the allegations made in the complaint and we intend to vigorously defend ourselves through the appropriate legal channels,” Sean Mansouri, the head of investor relations for Schwazze, told BusinessDen.
“There are a lot of claims that were made — intentionally devaluing collateral, this and that — but we acted in good faith at all times in our negotiations, so we vehemently deny that.”
Altmore Capital, a major lender to cannabis companies out of Washington D.C., is suing Schwazze in Denver District Court. Formerly known as Medicine Man Technologies, Schwazze owns 30 dispensaries in Colorado, four grows and a manufacturing plant in Pueblo.
Altmore says that it loaned $15 million to Schwazze in 2021 and is still owed $11.1 million. That makes it a junior lender, since the investment firm Chicago Atlantic loaned $95 million.
After missing a loan payment in early March, Schwazze told Altmore that it was restructuring its debts into good collateral and bad collateral and Altmore’s collateral — four dispensaries, a grow and the Pueblo plant — would be labeled bad collateral unless Altmore agreed to reduce the amount it is owed by more than 70 percent, according to Altmore’s lawsuit.
“With respect to repaying the loan, look, we have been very public about being in a broader financial and strategic review of the business, including efforts to restructure our capital base,” Mansouri said. “So, during that process, we have had to make strategic decisions about how and when to allocate resources, including the timing of certain payments.”
“Ultimately, we are going to focus on the long-term stability of the business,” he added.
Altmore claims that Schwazze has, “on multiple occasions, threatened that it would devalue Altmore’s collateral by shutting down” the four dispensaries and other properties. The lender’s lawsuit does not say where the four dispensaries and the cultivation site are.
Meanwhile, at the plant in Pueblo, Schwazze has removed a machine for pre-rolling joints, “a deliberate attempt to remove millions of dollars of revenue and EBITDA from the collateral,” according to Altmore’s lawsuit, which claims that move was a fraudulent transfer.
Altmore says that Schwazze has admitted its debts surpass its assets. So, the lender wants a receiver to oversee the company’s restructuring, to protect Altmore’s interests.
Altmore’s attorneys are Claire Wells Hanson and Darren Kaplan with Clark Hill in Denver.
“The lawsuit has not impacted our operations or any kind of commitment to customers,” says Mansouri with Schwazze investor relations. “We are continuing to operate in the ordinary course, continuing to serve both patients and recreational customers, being good stewards of our suppliers and supporting our employees across Colorado and New Mexico.”
