Canadian cannabis cultivator PharmHouse Inc. has been granted creditor protection and will look to restructure its business and operations while halting court proceedings where several pot producers were sued for US$500 million over a supply dispute. 

Canopy Rivers Inc., the venture capital arm of Canopy Growth Corp. and a 49 per cent owner in Leamington, Ont.-based PharmHouse, said in a statement Wednesday the creditor protection order will help to address the greenhouse operator's financial concerns while providing US$7.2 million in debtor-in-possession financing. 

The announcement comes less than a month after a numbered company that controls the remaining 51 per cent of PharmHouse sued a group of cannabis producers including Canopy Growth, Canopy Rivers and TerrAscend Corp. for $500 million in damages while alleging the companies committed “bad faith, fraud, civil conspiracy, breach of the duty of honesty and good faith in contractual obligations, and breach of fiduciary duty,” according to court documents. 

However, after being awarded creditor protection, the court proceedings have been stayed. Canopy Rivers said in its statement that discussions between PharmHouse and the group of cannabis producers regarding its supply agreements have "been unsuccessful and have led to a significant deterioration in the relationship between the parties." 2615975 Ontario Inc., the company which owns a 51-per-cent stake in PharmHouse, will not provide any additional financing to address the greenhouse facility's liquidity issues, according to Canopy Rivers. 

The numbered company is led by Paul Mastronardi, chief executive officer of Mastronardi Produce Ltd., a greenhouse operator with over 70 years of experience in growing produce for the Canadian market. 

Nearly a dozen cannabis-related companies have either filed for or been granted creditor protection so far this year as liquidity problems weigh on the sector amid ongoing oversupply concerns. 

Canopy Rivers added that it expects to take a US$32.6-million impairment charge on its investment in PharmHouse when it reports its upcoming quarterly results, as well as a $50.2-million charge related to loans it provided to the greenhouse operator. It said it may also incur further liability charges related to a $90-million syndicated credit facility it is a guarantor for. ​