Advanced Flower Capital Inc.AFCG
Advanced Flower Capital Inc. Debt Disclosure
DEBT
Revolving Credit Facility
On April 29, 2022, the Company entered into the Loan and Security Agreement (the “Revolving Credit Agreement”) by and among the Company, the other loan parties from time to time party thereto, the lenders party thereto, and the lead arranger, bookrunner and administrative agent party thereto, pursuant to which, the Company obtained a $60.0 million senior secured revolving credit facility (as amended from time to time, the “Revolving Credit Facility”). The Revolving Credit Facility has a maturity date of April 29, 2025.
The Revolving Credit Facility contains aggregate commitments of $60.0 million from two FDIC-insured banking institutions (which may be increased to up to $100.0 million in aggregate, subject to available borrowing base and additional commitments) which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Facility. Interest is payable on the Revolving Credit Facility at the greater of (1) the applicable base rate plus 0.50% and (2) 4.50%, as provided in the Revolving Credit Agreement, payable in cash in arrears. Upon entering into the Revolving Credit
Agreement, the Company incurred a one-time commitment fee expense of approximately $0.5 million, which was included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the facility. Commencing on the six-month anniversary of the closing date, the Revolving Credit Facility has an unused line fee of 0.25% per annum, payable semi-annually in arrears, which is included within interest expense in the Company’s consolidated statements of operations. Based on the terms of the Revolving Credit Agreement, the Company’s estimated average cash balance will exceed the minimum balance required to waive the unused line fee and as such, the Company did not incur an unused line fee during the year ended December 31, 2024. As of December 31, 2024 and 2023, outstanding borrowings under the Revolving Credit Facility were $60.0 million and $42.0 million, respectively, and zero and $18.0 million was available for borrowing as of December 31, 2024 and 2023, respectively. As of December 31, 2024, the interest rate on the Company’s borrowings under the Revolving Credit Facility was 8.00%.
The obligations of the Company under the Revolving Credit Facility are secured by certain assets of the Company comprising of or relating to loan obligations designated for inclusion in the borrowing base. In addition, the Company is subject to various financial and other covenants, including: (1) liquidity of at least $5.0 million, (2) annual debt service coverage of at least 1.5 to 1.0 and (3) secured debt not to exceed 25% of total consolidated assets of the Company and its subsidiaries. To the best of our knowledge, as of December 31, 2024, we were in compliance in all material respects with all covenants contained in our Revolving Credit Agreement.
In March 2024, the Company entered into Amendment Number One to Loan and Security Agreement, by and among the Company, as borrower, the lenders party thereto and the lead arranger, bookrunner and administrative agent party thereto, pursuant to which, among other things, the parties agreed expand the borrowing base to include funds maintained in a borrowing base cash account.
In July 2024, the Company entered into Amendment Number Two to Loan and Security Agreement, by and among the Company, as borrower, the lenders party thereto, and the lead arranger, bookrunner and administrative agent party thereto, pursuant to which, among other things, the parties agreed to exclude certain subsidiaries from the calculation of certain financial covenants so long as such subsidiaries are considered immaterial under the terms of the Loan and Security Agreement.
In January 2025, the Company entered into Amendment Number Three to Loan and Security Agreement, by and among the Company, as borrower, the lenders party thereto, and the lead arranger, bookrunner and administrative agent party thereto, pursuant to which, among other things, the parties agreed to reduce the procedural requirements for obligor loan receivables to become eligible under the borrowing base.
AFCF Credit Facility
In December 2024, the Company entered into an unsecured revolving credit agreement (the “AFCF Credit Agreement”), by and among the Company, as borrower, the lenders party thereto from time to time, and AFC Finance, LLC, as agent and lender. AFC Finance, LLC is wholly owned by Leonard M. Tannenbaum, Chairman of the Company’s Board of Directors. The AFCF Credit Agreement provides for an unsecured revolving credit facility (the “AFCF Credit Facility”) with a $40.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the AFCF Credit Agreement. Interest is payable on the AFCF Credit Facility at a rate per annum equal to 8.00%. The AFCF Credit Facility matures on the earlier of (i) December 31, 2025 and (ii) the date of the closing of any unsecured debt with principal of at least $40.0 million used to refinance the AFCF Credit Agreement. As of December 31, 2024, outstanding borrowings under the AFCF Credit Facility were $40.0 million and zero was available for borrowing as of December 31, 2024. As of December 31, 2024, the interest rate on the Company’s borrowings under the AFCF Credit Facility was 8.00%.
2027 Senior Notes
On November 3, 2021, the Company issued $100.0 million in aggregate principal amount of senior unsecured notes due in May 2027 (the “2027 Senior Notes”). The 2027 Senior Notes accrue interest at a rate of 5.75% per annum. Interest on the 2027 Senior Notes is due semi-annually on May 1 and November 1 of each year, which began on May 1, 2022. The net proceeds from the offering were approximately $97.0 million, after deducting the initial purchasers’ discounts and commissions and estimated offering fees and expenses payable by the Company. The Company used the proceeds from the issuance of the 2027 Senior Notes (i) to fund loans related to unfunded commitments to existing borrowers, (ii) to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with the Company’s investment strategy and (iii) for working capital and other general corporate purposes. The terms of the 2027 Senior Notes are governed by an indenture, dated November 3, 2021, among us, as issuer, and TMI Trust Company, as trustee (the “Indenture”).
Under the Indenture, the Company is required to cause all of its existing and future subsidiaries to guarantee the 2027 Senior Notes, other than certain immaterial subsidiaries as set forth in the Indenture. TRS1 is currently a subsidiary guarantor under the Indenture.
Prior to February 1, 2027, the Company may redeem the 2027 Senior Notes in whole or in part, at a price equal to the greater of 100% of the principal amount of the 2027 Senior Notes being redeemed or a make-whole premium set forth in the Indenture, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date. On or after February 1, 2027, we may redeem the 2027 Senior Notes in whole or in part at a price equal to 100% of the principal amount of the 2027 Senior Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. The Indenture also requires us to offer to purchase all of the 2027 Senior Notes at a purchase price equal to 101% of the principal amount of the 2027 Senior Notes, plus accrued and unpaid interest if a “change of control triggering event” (as defined in the Indenture) occurs.
The Indenture contains customary terms and restrictions, subject to a number of exceptions and qualifications, including restrictions on the Company’s ability to (1) incur additional indebtedness unless the Annual Debt Service Charge (as defined in the Indenture) is no less than 1.5 to 1.0, (2) incur or maintain total debt in an aggregate principal amount greater than 60% of the Company’s consolidated Total Assets (as defined in the Indenture), (3) incur or maintain secured debt in an aggregate principal amount greater than 25% of the Company’s consolidated Total Assets (as defined in the Indenture), and (4) merge, consolidate or sell substantially all of the Company’s assets. In addition, the Indenture also provides for customary events of default. If any event of default occurs, any amount then outstanding under the Indenture may immediately become due and payable. These events of default are subject to a number of important exceptions and qualifications set forth in the Indenture.
During the year ended December 31, 2023, the Company repurchased $10.0 million in principal amount of the Company’s 2027 Senior Notes at 77.4% of par value, plus accrued interest. This resulted in a gain on extinguishment of debt of approximately $2.0 million, recorded within the consolidated statements of operations. No repurchases took place during the year ended December 31, 2024. As of December 31, 2024 and 2023, the Company had $90.0 million in principal amount of the 2027 Senior Notes outstanding. As of December 31, 2024, the interest rate on the Company’s borrowings under the 2027 Senior Notes was 5.75%
The 2027 Senior Notes are due on May 1, 2027. Scheduled principal payments on the 2027 Senior Notes as of December 31, 2024 are as follows:
| 2027 Senior Notes | |||||
| Year | |||||
| 2025 | $ | — | |||
| 2026 | — | ||||
| 2027 | 90,000,000 | ||||
| 2028 | — | ||||
| 2029 | — | ||||
| Thereafter | — | ||||
| Total principal | 90,000,000 | ||||
| Deferred financing costs included in senior notes | (1,387,850) | ||||
| Total due senior notes, net | $ | 88,612,150 | |||
The following tables reflect a summary of interest expense incurred during the years ended December 31, 2024 and 2023:
| Year ended December 31, 2024 | |||||||||||||||||||||||
| 2027 Senior Notes | Revolving Credit Facility | AFCF Revolving Credit Facility | Total Borrowings | ||||||||||||||||||||
| Interest expense | $ | 5,175,000 | $ | 117,387 | $ | 18,778 | $ | 5,311,165 | |||||||||||||||
| Amortization of deferred financing costs | 632,592 | 392,551 | — | 1,025,143 | |||||||||||||||||||
| Total interest expense | $ | 5,807,592 | $ | 509,938 | $ | 18,778 | $ | 6,336,308 | |||||||||||||||
| Year ended December 31, 2023 | |||||||||||||||||||||||
| 2027 Senior Notes | Revolving Credit Facility | AFCF Revolving Credit Facility | Total Borrowings | ||||||||||||||||||||
| Interest expense | $ | 5,290,000 | $ | 68,667 | $ | — | $ | 5,358,667 | |||||||||||||||
| Unused fee expense | — | 47,915 | — | 47,915 | |||||||||||||||||||
| Amortization of deferred financing costs | 641,662 | 309,213 | — | 950,875 | |||||||||||||||||||
| Total interest expense | $ | 5,931,662 | $ | 425,795 | $ | — | $ | 6,357,457 | |||||||||||||||
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.