Kentucky hemp company, with more than $100 million in debts, files for bankruptcy
Winchester hemp processor GenCanna announced on Thursday that it has filed for bankruptcy to reorganize the company’s debt.
The move comes after creditors last month filed an involuntary bankruptcy petition in federal bankruptcy court in Lexington.
Kentucky Agriculture Commissioner Ryan Quarles said Thursday the company’s financial difficulties have put Kentucky farmers in jeopardy.
“I think this is really a gut punch to Kentucky’s growing hemp industry. Lot of farmers spent a lot of time, a lot of hope and a lot of risk on this crop and it’s clear some processors overextended themselves in this unstable market,” Quarles said.
“We want to make sure our farmers are first to get paid because they put sweat equity into a new crop and their success depends on the processor’s success. We support anything that gets farmers paid.”
The biggest underlying factor, Quarles said, is uncertainty about FDA regulation of CBD, which has left processors without potential markets.
He said he is pressing the Food and Drug Administration to “tell us what direction they are heading for eventual regulation with CBD products.”
And he said Kentucky farmers need it soon: “We have over 200 hemp companies in Kentucky, all of which are start ups, and we anticipate even more processors in 2020.”
Which means GenCanna might not be an isolated case. The company is one of Kentucky’s largest hemp processors; through an affiliate, it contracts with Kentucky farmers to grow hemp that it processes to extract CBD and other cannabinoids.
GenCanna said Thursday that its Chapter 11 filing will let the company continue to operate “while working through a reorganization plan that could include refinancing of the company’s existing indebtedness, or an alternative restructuring transaction such as a sale.”
GenCanna was the title sponsor at the Kentucky State Fair last year and has been a high profile advertiser.
The company said it had obtained about $10 million in post-petition debtor-in-possession financing from its senior lender, which will provide liquidity to maintain operations, subject to the court’s approval.
To operate in Kentucky, hemp companies must receive approval from the Kentucky Department of Agriculture, at least through 2020; GenCanna may continue to operate despite the bankruptcy.
“We are taking this action in order to position our business for success in a highly dynamic and rapidly evolving industry,” said Matty Mangone Miranda, chief executive officer of GenCanna Global, in the news release. “While this is certainly not the outcome we desired, the bankruptcy process gives us the ability to move forward in a way that allows us to best continue operations and serve customers as we work through our reorganization, resolve an outstanding legal dispute involving our Western Kentucky facility, navigate an uncertain regulatory environment and adjust our annual operating costs to better match the landscape.”
According to the bankruptcy petition filed on Wednesday, GenCanna has estimated assets and estimated liabilities of between $100 million and $500 million.
The unsecured creditors including Hemp Kentucky Growers, with an unsecured claim of more than $4 million.
GenCanna also moved to consolidate the involuntary bankruptcy petition into one case.
In the news release, Miranda said the company plans “to address certain structural issues that we could not fix on our own. We are grateful for the continued support of our existing senior lender, who recognizes the strength of our brand, and we will continue to work tirelessly on behalf of our employees, farmers, and vendor partners.”
GenCanna is also in arbitration with a group of Central Kentucky farmers who sued in October for $5 million over a failed joint venture. GenCanna was sued last year for more than $13 million over debts related to a Graves County processing plant they are building. And Lexington CPA firm Dean Dorton filed a suit in Fayette Circuit Court alleging GenCanna owes more than $500,000 for services.
In January, another major Kentucky hemp company also shut down. Sunstrand owner William “Trey” Riddle of Louisville filed for Chapter 7 bankruptcy to liquidate the company, which specialized in using hemp in building materials.
According to that filing, Riddle and Sunstrand have between $100,001 and $500,000 in assets but owe more than $10 million.
This story was originally published February 6, 2020 at 1:28 PM.
