• NAB gives cannabis stock Cann Group (ASX:CAN) a $50 million debt facility towards construction of its medical cannabis production facility
  • The first time a Tier 1 bank gets behind cannabis sector and first debt financing deal for the sector
  • Cann Group CEO Peter Crock says it gives his company and the sector hope headed into 2021

In an industry-first deal, Cann Group (ASX:CAN) has won a $50 million debt facility to build its medical cannabis production facility.

NAB (ASX:NAB) has given the Victorian-headquartered cannabis stock proceeds to complete Stage 1 construction of its production facility near Mildura.

The company says the NAB financing marks the first time a Tier 1 bank has gotten behind the cannabis sector. It is also the first time a medicinal cannabis player has secured debt finance.

The first stage of the project will be enough for the facility to produce 12,500 kilograms of dry flower equivalent. Construction will start in February 2021 and take up nine months.

Cann Group has already funded $53 million of the estimated $112 million works and estimates it can fund the balance with the loan facility and cash reserves. It has also received a Victorian government development grant of $1.95 million for the project.


NAB financing ‘worth the effort’

Cann Group CEO Peter Crock said it had been a while coming but was a big deal for his company and the industry.

He said COVID-19 had delayed progress but the deal means the company can look forward to next year.

“We did expect to get this sort of deal but clearly COVID had an impact with the banks,” Crock told Stockhead.

“But we’re pleased, to be able to move forward with a Tier 1 Bank is really significant. It has definitely been worth the effort to get to this point.”

Crock also thinks the broader cannabis industry, seeking to reduce Australia’s reliance on imports, can move ahead with confidence.

“I think it gives the whole industry confidence in having someone as significant as NAB stepping into the sector and recognising the opportunity here,” he said.


NAB deal gives cannabis sector hope for 2021

2020 has been a mixed bag for the cannabis sector. It has rode the highs of the TGA’s interim ruling that could lead to customers obtaining low-dose cannabinoid (CBD) oils and pills from pharmacists prescription-free and hopes that deregulation could be coming to the US as well with Joe Biden’s win.

It’s likely NAB’s financing will fuel hope that more cannabis deals are forthcoming.

On the other hand, the sector took a hit early on the pandemic from freight restrictions and weak consumer confidence. Additionally, Cann lost major backer Aurora Cannabis which sold its 11.84 per cent stake last month.

Crock thinks this deal gives his company and the industry hope that next year will be better.

“I think everyone wants to put a line through 2020 and we’re ready to move on and this is a really exciting project to lead the way into 2021,” he said.

Shares in Cann Group rose 11 per cent this morning.

Cann Group (ASX:CAN) share price chart