AeroFarms® has filed for voluntary bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in the US Bankruptcy Court for the District of Delaware. The company operates the world’s largest aeroponic smart farm in Danville, Virginia and the world’s largest Research and Development farm in Abu Dhabi, UAE. The grower’s leafy greens can be found at major retailers like Ahold Delhaize, Amazon Fresh, Harris Teeter, The Fresh Market, Walmart, Whole Foods Market, and more.
In addition to the petition for bankruptcy, the Company has filed various ‘first day’ motions with the bankruptcy court requesting customary relief that will enable it to transition into Chapter 11, with limited disruptions to its on-going core business operations.
Aerofarms has also entered into an agreement with an existing group of its investors to provide US$10 million in debtor-in-possession (“DIP”) financing, as part of a larger round of financing that includes those investors. Approval of the DIP financing is part of the first day motions filed with the bankruptcy court. Upon approval by the Bankruptcy Court, the DIP financing, together with cash generated from ongoing operations, is expected to provide AeroFarms with the necessary liquidity to support its operations during the bankruptcy process.
Changes at the top
AeroFarms also announced that Co-Founder and Chief Executive Officer, David Rosenberg, is stepping down from his role as CEO and he will instead work as a special advisor to the Board. Chief Financial Officer Guy Blanchard will assume the additional role of President of AeroFarms where he will be working closely with a Special Committee of the Board of Directors consisting of Jim Borel and Peter Lacy, both long-term AeroFarms independent board members, to help guide the Company through the bankruptcy process.
Mr. Borel has more than 45 years of industry experience as an executive at DuPont and as a member of the boards of several agriculture and food companies. Mr. Lacy is Global Sustainability Services Lead, Chief Responsibility Officer, and a Global Management Committee Member at the consulting firm Accenture.
Danville operations to continue
AeroFarms’ critical Danville, Virginia farm continues to scale according to plan. According to Nielsen, AeroFarms microgreens have become the dominant market leader at retail ([Microgreen SKUs] Total US xAOC 52-weeks ending 20-May-2023). The primary focus of the investor group is to assure that AeroFarms will operate as usual throughout the Chapter 11 filing, servicing its growing customer base and key selling partners, including additional retailer expansions planned for the remainder of 2023.
“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,” said Guy Blanchard, President and CFO of AeroFarms. “There is incredible consumer and customer interest for our market-leading microgreens, and we are excited to continue be able to build our business to meet that demand.”
What happens when a company files for chapter 11?
When a company files for Chapter 11, it means that they are seeking protection under Chapter 11 of the United States Bankruptcy Code. Chapter 11 is a form of bankruptcy that allows a company to reorganise its debts, operations, and assets while continuing its business operations. Here’s what typically happens when a company files for Chapter 11:
- Petition for bankruptcy: The company files a petition for Chapter 11 bankruptcy in a federal bankruptcy court. This initiates the legal process and triggers an automatic stay, which halts most creditor actions against the company.
- Formulating a reorganisation plan: The company, with the assistance of its management, legal advisors, and possibly a bankruptcy trustee, develops a reorganisation plan. The plan outlines how the company intends to restructure its debts, operations, and finances to become profitable again.
- Disclosure statement: The company prepares a disclosure statement that provides detailed information about its financial situation, operations, and proposed reorganisation plan. The disclosure statement must be approved by the bankruptcy court, ensuring that it contains sufficient information for creditors to make an informed decision about the plan.
- Creditor negotiations: The company negotiates with its creditors to reach agreements on how debts will be restructured. This may involve reducing the outstanding debt, extending repayment periods, or changing interest rates. The goal is to obtain creditor approval for the reorganisation plan.
- Creditors’ vote: The company presents its reorganisation plan to its creditors for a vote. Creditors holding claims against the company, such as lenders, bondholders, and suppliers, have the right to accept or reject the plan. The plan requires approval from the creditors representing a majority in number and two-thirds in value of the claims to be confirmed by the court.
- Confirmation by the court: If the reorganisation plan is approved by the required majority of creditors, it is presented to the bankruptcy court for confirmation. The court evaluates the plan to ensure it is fair, feasible, and in the best interest of the creditors. Once the court confirms the plan, it becomes binding on all parties involved.
- Execution of the plan: The company executes the reorganisation plan, which may involve restructuring debts, selling assets, renegotiating contracts, or other measures to improve its financial stability and profitability. The company continues its business operations throughout this process.
- Emergence from bankruptcy: Once the company has successfully implemented the reorganisation plan, it emerges from Chapter 11 bankruptcy. It continues to operate as a going concern, ideally in a financially healthier state.
It’s important to note that the Chapter 11 process can be complex and time-consuming, and each case may vary depending on the circumstances. The company’s management, legal advisors, and the bankruptcy court oversee the process to ensure compliance with bankruptcy laws and protect the interests of creditors and stakeholders involved.
