Kentucky’s AppHarvest files for bankruptcy as it looks for solutions to cash flow issues
Kentucky-based AppHarvest has filed for bankruptcy, the company announced Monday.
The indoor produce grower made a dozen different filings in the federal bankruptcy court for the Southern District of Texas on Sunday.
The filings come after an eventful few months for the cash-strapped company. Last month, a creditor demanding payment opened a foreclosure lawsuit against the company’s Richmond facility. Nearly two weeks ago, the owner of AppHarvest’s Berea farm announced that it wanted to terminate the company’s lease there.
With its Chapter 11 bankruptcy filing, AppHarvest is looking to restructure the company while also seeking solutions to both of those issues, a press release from the company said. Business operations continue at the company’s four farms.
Equilibrium — the company which filed the foreclosure suit against AppHarvest that demanded the immediate repayment of over $60 million in debt — will provide the cash necessary to help AppHarvest continue operations at its farms in Richmond, Somerset and Morehead.
In a press release, AppHarvest said the nearly $30 million “debtor-in-possession” funding is subject to court approval.
AppHarvest is seeking to transition its farm in Berea to its distribution partner, Mastronardi Produce. Mastronardi already owns the farm and weeks ago told AppHarvest that they intended to terminate AppHarvest’s lease. AppHarvest sold the property to Mastronardi in a cash-generating move back in December.
AppHarvest will turn the farm over to Mastronardi in exchange for about $3.75 million and additional funding and support for AppHarvest’s “restructuring plan,” the company said. The deal with Mastronardi is also subject to court approval.
“The AppHarvest board of directors and executive leadership evaluated several strategic alternatives to maximize value for all stakeholders prior to the Chapter 11 filing,” said AppHarvest CEO Tony Martin. “The Chapter 11 filing provides protection while we work to transition operation of our strategic plan, Project New Leaf, which has shown strong progress toward operational efficiencies resulting in higher sales, cost savings and product quality.”
Martin recently took over as the company’s CEO after Jonathan Webb, the Kentucky native who founded the company, stepped down from the position earlier this month.
Prior to the bankruptcy filing, four company executives received nearly $2.47 million in direct cash payments from the company, AppHarvest announced in a public filing last week. Martin, Webb and Chief Financial Officer Loren Eggleton each received payments of $540,000. Gary Broadbent, the company’s new chief legal and restructuring officer, received $850,000.
Travis Parman, the company’s chief communications officer said that “retention compensation” is standard for companies in AppHarvest’s shoes.
“Standard practice for companies in this situation is to offer retention incentives to key employees with in-depth knowledge of the business,” Parman said in a statement. “These incentives must be repaid fully or in part should the employee voluntarily leave or be terminated for cause before the end of the contract term.”
Through the end of March, the company has over $609 million in assets and over $341 million in debts, bankruptcy court filings show.
In terms of public funding, AppHarvest received $1.9 million from the state of Kentucky in 2020 to help build a road for its Morehead facility. Less than a year later the company received a $50 million loan backed by the USDA.
Equilibrium is AppHarvest’s largest secured creditor, the company said in its release. Dalsem Greenhouse Technology, a Netherlands-based company that manufactures and installs the high tech greenhouse equipment used by AppHarvest, is the largest unsecured creditor. According to court filings, AppHarvest owes Dalsem over $14 million but AppHarvest previously disputed that claim.
AppHarvest’s stock price (APPH) fell to $0.12 following the announcement of the bankruptcy filing Monday morning, falling from the $0.34 the company closed at Friday. The price has sat below $1 since February. In April, the company received noticed from Nasdaq that it would be delisted from the stock exchange if the stock price’s did not close above $1 for 10 consecutive days before October 16, public filings show.
The bankruptcy filing comes less than a year after AppHarvest — which grows large quantities of fruits and vegetables in massive, climate-controlled greenhouses and employs hundreds of people — said in public filings that it was running low on cash and disclosed “substantial doubt” about its future.
This is a developing story and will be updated.
This story was originally published July 24, 2023 at 10:09 AM.