Cannabis retailer Tokyo Smoke has emerged from bankruptcy protection after completing a restructuring process, the company announced.

The Ontario Superior Court of Justice has granted final approval, allowing the company to move forward as a stronger, more competitive business, said Tokyo Smoke in a news release. Toronto-based TS Investments, the sole shareholder of Tokyo Smoke’s parent company, acquired the cannabis retailer after launching the sale and investment solicitation process with a $77-million stalking horse bid and being declared the successful bidder.

The majority of Tokyo Smoke’s retail locations remained operational throughout the restructuring, but the company previously announced plans to close 29 stores.

The restructuring process began in August when Tokyo Smoke filed for protection under the Canadian Companies’ Arrangement Act.

With the restructuring now complete, Tokyo Smoke is poised for long-term success, said the company. Tokyo Smoke said it remains dedicated to serving its customers with high-quality regulated cannabis products through its expansive retail network and online platform.

It also aims to continue providing employment for hundreds of Canadians while fostering a deeper understanding of cannabis through education and empowerment.

The company had approximately $102.3 million of debt as of June 30.

Toronto-based Alvarez & Marsal Canada served as the court-appointed monitor in accordance with the CCAA. Alvarez & Marsal attributed the urgent need for relief to a saturation of the market in Ontario after the province allowed an unlimited number of cannabis retail licenses and store authorizations.

The number of Ontario cannabis licenses has ballooned to 1,600 from 100 in 2019 after pot was legalized in the province, said Alvarez & Marsal in a court filing. Also, an oversupply has resulted because Ontario’s cannabis is sourced from one regulated wholesaler that sells the same product to all retailers, said the monitor.

Alvarez & Marsal also cited a thriving grey market, which has removed revenues and profits from legitimate operators, and the effects of the COVID-19 pandemic as causes of Tokyo Smoke’s financial woes. (A grey market is defined as a quasi-legal market.)

TS Investments agreed to provide $8 million of debtor-in-possession financing in the form of a non-revolving loan facility, including an initial advance of $3.3 million, during the court proceedings.

Tokyo Smoke was previously owned by OEG Retail Cannabis, a holding of Edmonton Oilers owner Daryl Katz, according to the Canadian Press.

Photo: Tokyo Smoke