Winnipeg Free Press

Winnipeg Free Press (Newspaper) - July 17, 2024, Winnipeg, Manitoba B5 WEDNESDAY JULY 17, 2024 ● BUSINESS@FREEPRESS.MB.CA ● WINNIPEGFREEPRESS.COM BUSINESS ‘A very big hit’: Elkhorn Resort makes splash with new Nordic spa FINISHING touches on a $10-million resort expansion on the south edge of Riding Mountain National Park are al- most complete. But already, Klar So Nordic Spa has welcomed throngs of customers in its saunas, hot tubs and cold plunge. “It’s been a very big hit,” said Mi- chelle Jonas, guest services manager and events co-ordinator at Elkhorn Re- sort Spa and Conference Centre. The new spa — covering roughly 1,700 square metres — replaces an old facility at Elkhorn, roughly a five- minute drive from the Clear Lake town- site of Wasagaming. Jonas believes Klar So will draw more people to Elkhorn Resort in the winter months, when many park activ- ities are unavailable. “It gives the locals … another reason to be here,” she added. Over the past two years, the resort has created a four-building, ages 18+ fa- cility centred on the Nordic practice of thermotherapy, where users alternate between hot and cold temperatures and rest in between. Thermëa by Nordik Spa-Nature popu- larized the experience in Winnipeg. Klar So, which is a roughly three- hour drive northwest of Winnipeg, touts dry and wet saunas; a relaxation room with heated, tiled lounge chairs; two hot tubs; a temperate pool; and a cold plunge. There are lockers for 100 people and a restaurant specifically for the spa. A previously established therapy site at Elkhorn — selling massages and facials — is attached to Klar So. The tourist site demolished its former pool in 2019 to make room for the spa, according to Ray Piche, the company’s conference sales manager (no relation). Meanwhile, the resort created a new pool with an indoor and outdoor hot tub attached. Construction on Klar So was delayed due to the COVID-19 pandemic, Piche explained. Shovels hit the ground in the fall of 2022; the spa opened in Decem- ber. Landscaping work is ongoing and ex- pected to finish within the next couple weeks, Piche estimated. A typical day pass costs $84 Sundays through Fridays; it increases to $94 on Saturdays. Piche believes the spa will be wel- comed by conference-goers. Elkhorn Resort books more than a dozen confer- ences monthly, Jonas approximated. The bistro and patio area are licensed; Jonas hopes to licence the spa itself in the future — think wine by hot tubs. “Maybe a margarita night or have a live band in there,” she said, adding no such paperwork has yet been filed. “Beer tasting, wine tasting, all of it.” Municipality of Harrison Park Reeve Ian Drul applauded the opening of Klar So. He called it a “great boost to the economy.” Elkhorn Resort has hired roughly a dozen people to accommodate the spa and bistro. The facility will enhance lo- cal tourism and corporate sectors, Drul wrote in an email. “(I’m) very pleased that the owner- ship group has decided to bring this beautiful attraction to … our municip- ality.” Harrison Park, which Elkhorn Re- sort resides in, had a population count of 1,852 in 2021. Travel Manitoba’s president also praised the new Nordic spa. “This is a terrific addition to the at- tractions in Clear Lake,” Colin Fergus- on said in a statement. gabrielle.piche@winnipegfreepress.com GABRIELLE PICHÉ SUPPLIED Klar So Nordic Spa, near Riding Mountain National Park, is finalizing its landscaping touches. Manitoba’s largest cannabis producer pitches court plan to settle debt, sell assets Delta 9 seeks creditor protection D ELTA 9 Cannabis Inc. has filed for creditor protection with the courts, under loom- ing threat its lender might be making a move to seize the Winnipeg-based company’s assets. Late Monday, Delta 9 filed a pro- posal under the Companies’ Creditors Arrangement Act (CCAA) that would see a white knight — Toronto-based FIKA Company — acquire all 41 of its retail locations in Manitoba, Saskatch- ewan and Alberta, and its distribution business, in exchange for paying off roughly $40 million in debt owed to Cal- gary-based SNDL Inc. The proposal, which still has to be approved by the courts, also includes FIKA issuing $2 million worth of shares to Delta 9’s shareholders, as well as $4 million in shares to its unsecured creditors. Delta 9 has about $15 million worth of unsecured debt to suppliers. The proposal also imagines a sales process to be managed by the court-ap- pointed monitor, Alvarez & Marsal, to find a buyer for Delta 9’s unprofitable cannabis production operation. The company — Manitoba’s largest in the sector, producing medical and recreational cannabis, with wholesale and retail sales channels — has sought an initial stay of proceedings that lasts until the middle of next week, when it will seek an extension of the protection. On Tuesday, John Arbuthnot, founder and CEO of Delta 9, said there will be no immediate material change in oper- ations. “The company is not bankrupt and we will continue to operate in the nor- mal course of business,” he said. Creditor protection was sought, Ar- buthnot said because of “aggressive” actions taken by SNDL, in the form of demand notices on a $10-million con- vertible debenture made in late May and the recent acquisition of $28.1 million long-term debt Delta 9 had owed Connect First and Servus Credit Union Ltd. SNDL promptly demanded repay- ment of that debt, again claiming that terms of the loan were in default, com- pany officials said. Although Delta 9 had produced more profitable quarters than most publicly traded cannabis companies in Canada, the market continues to be over-bal- anced with too much supply, observers said. Delta 9’s shares were down to one penny on Monday, giving it a market cap of about $3.5 million, despite the fact the company was generating rev- enue of more than $70 million per year. Because of that low share price and a few consecutive quarters of losses, Del- ta 9 no longer had the capacity to raise any more capital. In an interview, Arbuthnot said the CCAA process will generate about $55 million in value for the company’s stakeholders. “This is an outcome that maximizes value for everyone in what is otherwise a difficult situation.” It’s also a process that will allow the company to move forward in the ordin- ary course and flesh out other elements of the CCAA plan over the next few months. “In light of the aggressive actions from SNDL … it has been all hands on deck to put together this plan and get it to a point where it is ready for execu- tion,” Arbuthnot said. FIKA was founded in 2020, and has acquired other cannabis retailers — in- cluding some out of CCAA protection. It now has 144 retail stores under a variety of brands including FIKA Can- nabis, Friendly Stranger and Fire & Flower, but currently has no locations in Manitoba. As of January, Delta 9 had 12 stores under its brand name in Winnipeg alone. FIKA officials were unavailable for comment Tuesday. The proposal is still in its early stages and none of the features have yet to re- ceive full court approval. Frederico Gomes, an analyst with ATB Capital Markets who covers SNDL Inc., said it is it still possible SNDL might outbid FIKA for Delta 9’s retail locations. “After SNDL bought the debt from third party last week, it seemed pretty clear to us that SNDL was interested in seizing or acquiring the assets of Delta 9, specifically just the retail portfolio of 41 stores,” said Gomes. “In our view, that was the most likely outcome, as of last week.” Gomes said it will depend on the terms and conditions of FIKA’s repayment to SNDL as to how the plan might proceed. “Are they are going to try to repay that in full or maybe try to come to a different arrangement with SNDL? And would SNDL accept it? Or maybe SNDL would try to outbid FIKA?” Gomes said. “That is all uncertain. We don’t know.” Delta 9 is not alone among Canadian cannabis companies when it comes to financial woe. Investors have been burned over the years and “it’s fair to say it is a very negative market sentiment around Can- adian cannabis because of the track re- cord,” Gomes said. “Many investors have exited the space and we have seen lots of value destruction in the past with the shares of some big names trading at less than one per cent.” While Gomes said he was not famil- iar with Delta 9’s production operation, many producers have closed produc- tion facilities in the recent past, includ- ing SNDL. To others in the Manitoba cannabis space, Delta 9’s struggles are not a pleasant sight. Sharon Clark, spokeswoman for the Retail Cannabis Council of Manitoba, said: “To see Delta 9 filing for creditor protection is certainly disheartening as a cannabis industry pioneer and Mani- toba’s largest producer.” martin.cash@freepress.mb.ca MARTIN CASH MIKAELA MACKENZIE / FREE PRESS FILES Delta 9 is not alone among Canadian cannabis companies when it comes to financial woe: ‘Many investors have exited the space and we have seen lots of value destruction in the past,’ says ATB Capital Markets analyst Frederico Gomes. JESSE BOILY / FREE PRESS FILES ‘The company is not bankrupt and we will continue to operate in the normal course of business’ — John Arbuthnot, founder and CEO of Delta 9 Cannabis ;