GenCanna files for Chapter 11 bankruptcy
Published 3:26 pm Thursday, February 6, 2020
GenCanna Global USA Inc. has filed for bankruptcy.
The Winchester corporation, which produces hemp for CBD oil, announced Thursday morning in a press release distributed by Business Wire that it had filed a petition for voluntary Chapter 11 reorganization with the U.S. Bankruptcy Court in the Eastern District of Kentucky.
That would allow GenCanna to continue to conduct business while working through a reorganization plan that could include refinancing of its indebtedness or an alternative restructuring transaction such as a sale.
“We are taking this action in order to position our business for success in a highly dynamic and rapidly evolving industry,” Matty Mangone Miranda, chief executive officer of GenCanna Global, said in a statement. “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, resolve an outstanding legal dispute involving our Western Kentucky facility, navigate an uncertain regulatory environment and adjust our annual operating costs to better match the landscape.”
“Through this restructuring, we plan to address certain structural issues that we could not fix on our own. We are grateful for the continued support of our existing senior lender, who recognizes the strength of our brand, and we will continue to work tirelessly on behalf of our employees, farmers, and vendor partners.”
Three of the company’s creditors — Integrity Architecture of Lexington, Pinnacle Inc. of Benton, Kentucky, and Crawford Sales of Evansville, Indiana — had filed a petition Jan. 24 in the federal court to force GenCanna into bankruptcy. GenCanna was given 21 days to respond.
On Thursday, GenCanna consented to the petition. The day prior, according to court records, two debtor affiliates, GenCanna Global Inc. and Hemp Kentucky LLC, filed their own voluntary Chapter 11 petitions under the Bankruptcy Code. Those cases will be jointly administered under GenCanna Global USA Inc.
Judge Gregory R. Schaaf is the presiding judge in the case.
GenCanna has obtained approximately $10 million in post-petition debtor-in-possession (DIP) financing from its senior lender, which, subject to Court approval, will provide the company with liquidity to maintain its operations in the ordinary course of business during the Chapter 11 process, according to the press release by Gary Gerdemann off RunSwitch PR of Louisville.
GenCanna was founded in 2014 as part of the Kentucky Department of Agriculture’s Hemp Pilot Program and is a member of the U.S. Hemp Roundtable, which worked to secure passage of legislation to secure hemp as a legal agricultural commodity.
Before that, hemp had been a controlled substance because of its relation to marijuana, a different variety of the hemp plant that contains higher levels of the psychoactive ingredient THC. Industrial hemp, like that grown by GenCanna for its CBD oil, is not intoxicating. CBD oil is marketed and sold over the counter as a food supplement and for medicinal uses, but is not regulated by the Food and Drug Administration. Sales have plunged since the FDA issued a statement last November that it could not conclude that CDB is “generally recognized as safe” as food for people or pets.
On Monday, GenCanna responded to the FDA issue with this statement: “The hemp industry is struggling throughout the United States. Kentucky’s growers and processors, leaders in the nation’s hemp resurgence, are feeling the stress. Hemp and hemp-derived CBD products are trapped in a regulatory purgatory that does not fully allow the use of CBD as a supplement or food, in spite of any clinical evidence that it is unsafe.”
At that time, the company had laid off many workers, but would not disclose the number. It said it would continue to operate in Winchester and Kentucky with about 100 employees, along with more employed by its partners.
Kathryn Breiwa Robertson, a spokeswoman for the company, said Thursday she could not comment on the bankruptcy filing and that senior officials would not be granting interviews.
GenCanna has a 150-acre research campus and processing facility on Colby Road, administrative headquarters on Venable Road and a merchandising store on Lexington Avenue. The company contracts with Clark County and Kentucky growers.