By DOUG SCHMITZ
MOREHEAD, Ky. – A Morehead, Ky.-based indoor, sustainable agriculture company has filed for Chapter 11 bankruptcy after only three years in business, citing the need for “a financial and operational transition to enable the company to reduce its outstanding liabilities.”
Company officials said AppHarvest is “diligently working to restructure the operations at the company in an effort to maximize the value creditors can expect to achieve and to preserve jobs.”
“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, who replaced Jonathan Webb, company founder and former CEO, earlier last month.
According to bankruptcy court filings, AppHarvest had over $609 million in assets and over $341 million in debts at the end of March.
“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,” he added.
According to the company, which has been backed by Martha Stewart, AppHarvest is a sustainable food company in Appalachia, “developing and operating some of the world’s largest high-tech indoor farms with high levels of automation to build a reliable, climate-resilient food system.”
Moreover, AppHarvest’s farms are designed to grow produce using sunshine, rainwater and up to 90 percent less water than open-field growing, all while producing yields up to 30 times that of traditional agriculture, and preventing pollution from agricultural runoff.
Currently, AppHarvest operates its 60-acre flagship farm in Morehead, Ky., producing tomatoes; a 15-acre indoor farm for salad greens in Berea, Ky.; a 30-acre farm for strawberries and cucumbers in Somerset, Ky.; and a 60-acre farm in Richmond, Ky., for tomatoes. The four-farm network consists of 165 acres.
On Jan. 18, AppHarvest started commercial shipments from its first harvest of tomatoes at its new 60-acre high-tech indoor farm in Richmond, Ky. This marked the first time ever that all facilities in the AppHarvest four-farm network were shipping to top national grocery store chains, restaurants, and foodservice outlets under a variety of brands for Mastronardi Produce.
When asked what factors led up to AppHarvest filing for Chapter 11 bankruptcy after only three years, Darla Turner, AppHarvest director of corporate communications, told Farm World, “Essentially, we just weren’t making enough money fast enough to keep up with the bills.
“We’ve been making great progress on core operations though under the leadership of former COO and now CEO Tony Martin – with increasing volume, quality and sales,” she said. “So we believe that farms can emerge from this Chapter 11 as a healthy business.”
Turner said the company has a current strategy to get AppHarvest back on a good financial footing, while operations continue at the company’s farms.
“We have funding to keep the business running as usual for the next 60 days at farms in Morehead, Richmond, and Somerset,” she said.” Over that time, we’ll be working to sell the farms to investors with the goal of keeping them operational so they continue to employ about the same number of folks as now. The goal is to minimize any disruption to employees.”
She said employees at Morehead, Somerset and Richmond are focused on business as usual and can expect to be compensated as usual and continue to have access to benefits such as their vacation days.
“The Berea farm has been transitioned to Mastronardi Produce – the company from which we were leasing the farm,” she said. “Mastronardi has made employment offers to the team in Berea with similar compensation and benefits to what they were receiving before.”
AppHarvest has also obtained a commitment from Equilibrium, the company’s largest secured creditor, to provide approximately $30 million of debtor-in-possession financing to provide the necessary liquidity to support operations at the Morehead, Richmond and Somerset farms during the Chapter 11 process. The debtor-in-possession financing, however, is subject to approval of the court.
In addition, Turner said, “Multiple parties have expressed interest in the farms, and more continue to do so. The potential investors and operators of these high-tech farms is limited to a certain group of folks knowledgeable in the controlled environment agriculture space with whom we’re now working to try to ensure continuous operations that largely maintain the current level of employment.”