Vertical farming company AeroFarms has filed for Chapter 11 bankruptcy in Delaware, US, as it seeks legal protection to restructure its finances and operations.
The US Courts government website states that a case filed under Chapter 11 of the US Bankruptcy Code is “frequently referred to as a “reorganisation” bankruptcy. Usually, the debtor remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money. A plan of reorganisation is proposed, creditors whose rights are affected may vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements.”
Following “careful consideration” by its board, the company has also filed several “first-day” motions with the bankruptcy court, requesting customary relief in order to transition into Chapter 11, ensuring minimal disruption to the company’s core business operations.
The company listed $50 million to $100 million of liabilities in a petition filed in Delaware.
To support its operations during the bankruptcy process, AeroFarms has entered into an agreement with a group of its existing investors, who will provide $10 million in debtor-in-possession (DIP) financing. The fund, combined with cash generated from ongoing operations, is expected to offer the necessary liquidity for AeroFarms to navigate the challenges posed by the bankruptcy proceedings.
In a statement, AeroFarms explained that before initiating Chapter 11, the company evaluated various strategic alternatives with the goal of maximising value for all stakeholders. The company now intends to collaborate closely with its DIP lender investor group to speed up its emergence from Chapter 11. Furthermore, AeroFarms will explore additional financing options to enhance the company’s value and recovery for its creditors.
In addition, AeroFarms has announced a change in its leadership structure, with David Rosenberg, the business’ co-founder and CEO, deciding to step down from his position and assume a special advisory role for the board. AeroFarms’ CFO, Guy Blanchard, will take on additional responsibilities as the company’s president.
Meanwhile, AeroFarms says its farm in Danville, Virginia, will continue to scale according to plan. The company states that its microgreens have established a dominant market position at retail outlets, and the investor group supporting AeroFarms remains committed to ensuring the company operates seamlessly throughout the Chapter 11 filing, serving its growing customer base and key selling partners, which includes plans for retail expansions throughout 2023.
Guy Blanchard, president and CFO of AeroFarms, commented: “We are fortunate to have existing investors who continue to believe in AeroFarms and are confident that we can hit our targeted profitable operations for our Danville farm. There is incredible consumer and customer interest for our market-leading microgreens, and we are excited to continue [to] be able to build our business to meet that demand.”
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