Cannabis lender Talladega wants out of parallel cannabis lawsuit

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Talladega wants out of parallel cannabis trial. This is the lawsuit that disgruntled investors in Surterra Wellness (now known as Parallel) filed against company chief Beau Wrigley and Surterra Holdings, as well as a family office and Talladega LP and Talladega Inc. The company filed a motion earlier this week to dismiss its involvement and explain why it shouldn’t be part of the lawsuit. Talladega was not initially named in the case, rather it was about the Canadian hedge fund SAF Group, but they were replaced by Talladega.

This is a bridge loan that Talladega granted to Surterra/Parallel. The lender, owner of the junior tickets, said it was a purely selfish decision to keep the business operational in order to protect the health of these junior tickets.

Not in New York

First, Talladega says he shouldn’t be included in a trial in New York because he’s not located in the state. The company is based in Canada and says that alone should be grounds for being fired from the case.

A bridge over troubled waters

Next Talladega says he only provided a bridge loan that allowed Parallel to operate and was not really classified as debt that would violate the covenants of other debt instruments. In the petition, Talladega states, “Beginning in June 2021, shortly after Talladega and the Company entered into the Talladega Credit Agreement, the Company began to experience financial difficulty and defaulted both under Talladega’s Ticket Purchase Agreement and Credit Agreement. On December 16, 2021, Talladega issued a notice of default to the company listing 11 defaults or events of default under Talladega’s credit agreement. Following the issuance of the Notice of Default, the Company, PE Fund and Talladega entered into discussions to provide financing to the Company to enable it to “bridge” the gap until the Company could be sold to one or more third parties, or recapitalised.”

Talladega says disgruntled investors waited 10 days after the bridge loan to take legal action. Investors claimed that Talladega entered into the bridge loan in order to earn more fees and move to the head of the capital line. Talladega says he was just trying to protect himself from Parallel’s bankruptcy. The company wanted to give Parallel a chance to find a buyer or secure more financing. Fee amounts in bridging loan documents are redacted.

Investors have also complained that Talladega was an insider, but again the company says that’s untrue. The filing stated, “Beyond Talladega’s participation in the Talladega Credit Agreement and the Bridge Credit Agreement, Talladega has no close relationship with the Company that would give it any sort of control over the Company or shares of the company.”

Investors believe Talladega knew more than he is letting on because he was the administrative agent and junior noteholder collateral agent for Parallel. The original complaint stated: “The junior lien notice advised the company that it had failed to (i) maintain the required debt service coverage ratio; (ii) maintain the specified adjusted consolidated EBITDA as of September 30, 2021; and (iii) “pay the catch-up [a]ascend[s]due September 30, 2021. 99. The junior lien notice also explained that the company had defaulted on the junior note due to its “indebtedness under this negotiable subordinated promissory note dated June 30, 2021” – c ie, the PE fund rating. However, Talladega sending the default notice did not make him an insider.

In conclusion

Since Parallel is a private company, there is little information about the health of the company. In the state of Florida, where the company primarily operates, it is number five on the list of top licensees with 46 licenses according to Cannabiz Media. Trulieve leads with 121 licenses, followed by Curaleaf with 50, then Verano at 48 and Ayr Wellness with 47 licenses. However, none of the companies have broken down their Florida revenues, so it is difficult to determine how much revenue is going into the company.


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