AYR Wellness’s $50M Bridge Loan: A High-Stakes Gamble for Restructuring Success

AYR Wellness’s $50 million senior secured bridge loan, announced in August 2025, represents a pivotal but perilous maneuver in its restructuring efforts. The facility, structured with a 14% annual interest rate payable in kind (PIK) and additional premiums totaling 24% effective cost, underscores the company’s urgent need to stabilize operations while navigating a $904 million debt burden, including $358 million maturing by 2026 [1]. This high-cost financing is designed to fund a court-supervised Article 9 sale of core assets in six states—Florida, Ohio, Nevada, New Jersey, Pennsylvania, and Virginia—while enabling a wind-down of non-core operations [2].

The bridge loan’s conversion into a “take-back” term facility post-sale is a critical feature. Upon asset completion, the loan will roll into a senior secured obligation of the new entity (NewCo), which will be owned pro-rata by senior noteholders who canceled a portion of their debt [3]. This structure prioritizes creditor claims over equity holders, effectively wiping out AYR’s existing shareholders [4]. While this ensures continuity for NewCo, it raises questions about the new entity’s operational viability without equity infusions or proven profitability.

The covenant package further complicates the risk-reward profile. AYR must maintain a minimum liquidity of $17.5 million, tested weekly, and adhere to restrictions on additional indebtedness and asset sales [5]. These constraints limit flexibility during the restructuring, particularly as the company has already missed a $10 million interest payment on its senior notes, triggering a default risk [6]. The lack of transparent asset valuations exacerbates concerns: if the Article 9 sale proceeds fall short of covering the bridge loan’s principal and accrued PIK interest, NewCo could inherit unsustainable debt.

Industry precedents highlight the precariousness of AYR’s strategy. For example, Schwazze’s recent debt restructuring involved surrendering retail locations for a $65 million cash infusion, while Cresco Labs extended its debt maturity to 2030 through refinancing [7]. These cases demonstrate that cannabis operators often face binary outcomes—either aggressive deleveraging or insolvency—due to the absence of federal bankruptcy protections [8]. AYR’s path, however, leans heavily on creditor cooperation and asset sales, which may not generate sufficient value to offset its high-cost debt.

For creditors, the bridge loan offers a secured claim on AYR’s assets, which rank pari passu with its senior notes [9]. The 10% commitment, 10% exit, and 15% backstop premiums also provide immediate compensation, albeit at the expense of long-term returns. Equity investors, meanwhile, face near-total erosion of value, as the restructuring prioritizes debt cancellation over shareholder retention [10]. This dynamic mirrors broader trends in the cannabis sector, where $3 billion in loans are set to mature by 2026, forcing operators to adopt high-risk strategies to avoid default [11].

In conclusion, AYR’s bridge loan is a calculated but volatile bet. For creditors, it offers a secured path to partial recovery, albeit with elevated interest costs and operational uncertainties. For equity investors, it represents a near-total loss of capital, with NewCo’s success hinging on asset sale proceeds and regulatory stability. The restructuring’s ultimate success will depend on whether the asset sales generate enough value to cover the $50 million bridge loan, $358 million in maturing debt, and the 24% effective cost of financing—a scenario that appears optimistic given the opaque valuations and industry-wide liquidity crunch.

Source:
[1] AYR Wellness Secures $50M Bridge Loan [https://www.stocktitan.net/news/AYRWF/ayr-wellness-executes-senior-secured-bridge-credit-qxzrumbs015x.html]
[2] AYR Wellness Enters Into Restructuring Support Agreement with Senior Noteholders [https://ir.ayrwellness.com/news-events/press-releases/detail/264/ayr-wellness-enters-into-restructuring-support-agreement]
[3] AYR Wellness’s Restructuring Strategy and Bridge Financing [https://www.ainvest.com/news/ayr-wellness-restructuring-strategy-bridge-financing-path-preservation-high-cost-hail-mary-2508/]
[4] Cannabis Industry Debt Crisis 2026 [https://qredible.com/cannabis-industry-debt-crisis-2026-3-billion-in-loans-coming-due]
[5] AYR Wellness Executes Senior Secured Bridge Credit Agreement [https://ir.ayrwellness.com/news-events/press-releases/detail/265/ayr-wellness-executes-senior-secured-bridge-credit-agreement]
[6] AYR Wellness Misses Interest Payment on Outstanding Senior Notes [https://www.cannabisbusinesstimes.com/finance/news/15749836/ayr-wellness-misses-interest-payment-on-outstanding-senior-notes]
[7] How the Cannabis Sector Is Grappling with a Debt Avalanche [https://mjbizdaily.com/how-the-cannabis-sector-is-grappling-with-a-debt-avalanche/]
[8] Restructuring Alternatives for Distressed Business in the Cannabis Industry [https://www.thsh.com/publications/restructuring-alternatives-for-distressed-business-in-the-cannabis-industry-as-bankruptcy-courts-shut-their-doors-part-1-of-2]
[9] AYR Wellness Enters Into Restructuring Support Agreement [https://www.globenewswire.com/news-release/2025/07/30/3124507/0/en/AYR-Wellness-Enters-Into-Restructuring-Support-Agreement-with-Senior-Noteholders.html]
[10] AYR Wellness’s Restructuring Strategy and Bridge Financing [https://www.ainvest.com/news/ayr-wellness-restructuring-strategy-bridge-financing-path-preservation-high-cost-hail-mary-2508/]
[11] Cannabis Debt Crisis Looms as Billions in Loans Come Due in 2026 [https://mjbizdaily.com/cannabis-debt-crisis-looms-as-billions-in-loans-come-due-in-2026/]