Kentucky hemp processor, GenCanna Global USA Inc., has filed for Chapter 11 bankruptcy. Despite the setback, the company will continue to operate during the process. The filing may lead to a reorganization plan, debt refinancing, or even a possible sale according to a report by MarketWatch.
CEO Matty Magone-Miranda said that, “We are taking this action in order to position our business for success in a highly dynamic and rapidly evolving industry.”
“Today’s announcement is a gut punch to Kentucky’s hemp industry and to many Kentucky farmers who dared to hope and risk on this crop,” said Ryan Quarles, Kentucky Agriculture Commissioner. He takes the announcement as a sign that the industry is struggling to make progress and catch its stride. Quarles is prioritizing repayment for farmers and contractors that are currently owed money by GenCanna. Many of the farmers that worked all summer to produce their crops have yet to be paid by the producer. He believes that while some processors may have over-extended, they still need to fulfill their responsibilities.
The company stated that it obtained $10 million in ‘post-petition debtor-in-possession’ financing from its senior lender. If the court approves, the bump in cash reserves would give the company the liquidity it needs to keep operations running as normal during the bankruptcy proceedings. They are looking to adapt to a quickly changing landscape.
According to price and production estimates, Kentucky producers could have made between $55-65 million from the 2019 hemp crop. If accurate, that would constitute 1% of the state’s total agriculture and a large jump from the $17.7 million that growers made in 2018.
“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,” the company said.