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AeroFarms, Inc. – Garden State Global Vertical Farming Leader Files for Bankruptcy with Over $50mn of Liabilities; Lines Up $10mn of DIP Financing


June 8, 2023 – AeroFarms, Inc. and 14 affiliated debtors (together “AeroFarms” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case No. 23-10737 (Judge TBD). The Debtors, a Newark, NJ-based "sustainable indoor agriculture company" and operators of the world's largest vertical farm*, are represented by Stuart M. Brown of DLA Piper LLP (US). Further Board authorized appointments include: (i) Cloudpoint Capital LLC as investment bankers and (ii) Omni Agent Solutions as claims agent.

*In 2015, the Debtors started a growing space in a 30,000 square-foot former paintball and laser tag arena in Newark and in September 2016they  opened in a 70,000 square-foot facility (a former steel mill) in Newark, which is the largest indoor vertical farm in the world based on annual growing capacity. 

The Debtors’ lead petition notes between 200 and 1,000 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $50.0mn and $100.0mn (funded debt of $67.5mn). Documents filed with the Court list the Debtors’ three largest unsecured creditors as: (i) Ultimation Industries LLC ($428k trade claim), (ii) Morgan Mechanical Contractors, Inc ($267k trade claim) and (iii) Turatti SRL ($149k trade claim).

Goals of the Chapter 11 Financing

The Blanchard Declaration provides: "AeroFarms files these Chapter 11 Cases intending to emerge from chapter 11 in a stronger position to continue its indoor vertical farming business. While projections show the creation of a profitable business, the Company’s business is capital intensive at this stage, and attempts to raise sufficient capital to maintain operations have fallen short. Through these bankruptcy proceedings, the Company expects to address its liquidity constraints, address certain legacy liabilities and quickly emerge from bankruptcy either through a chapter 11 plan of reorganization or sale under section 363. The Company expects to file its plan for emergence from bankruptcy or a bidding procedures motion in the coming days."

Events Leading to the Chapter 11 Filing

In a declaration in support of first day filings (the “Blanchard Declaration) [Docket No. 14], Guy Blanchard, the Debtors’ President and CFO commented: “AeroFarms is an early-stage company with significant IP and a growing business….AeroFarms must expend significant resources to complete the buildout of its facilities, scale its production capacity, and invest in its technology platform, capabilities, and new products. 

AeroFarms’ new state-of-the-art farm in Danville, Virginia, has required significant capital outlay, which has further depleted the Company’s available liquidity. The Company is currently ramping up operations at Danville that is expected to be profitable by fall of 2023. 

In 2021, the Company sought to raise capital through a de-SPAC transaction with Spring Valley Acquisition Corp. Due to challenges in the capital markets, the de-SPAC transaction was unsuccessful. Since then, the Company has sought to raise additional funding through various capital raises, including the 2022 Notes and DVC Note. Most recently, on December 6, 2022, and January 6, 2023, the Company closed on two rounds of Series 3-A preferred equity financing which raised approximately $21,000,000. While the Company recognized the need for, and sought to obtain, additional financing, these efforts were unsuccessful. 

With no meaningful chance of raising third-party financing on a timeline that provided adequate liquidity to fund the Company’s operations, the Board turned to the Company’s existing debt holders and stockholders to provide sufficient financing to fund these Chapter 11 Cases and post-restructuring operational expenses."

DIP Financing

Minutes attached to the lead Petition note that the Debtors have commitments for $10.0mn of debtor-in-possession ("DIP") financing ($5.0mn interim). The DIP funcing is to come from "certain of the Debtors’ noteholders and Board members, or entities controlled by them*," with first lien prepetition lenders agreeing to allow the DIP financing to be pari passu to their own debt.


Prepetition Indebtedeness

The following table provides a summary of the Debtors’ prepetition funded debt obligations under the currently outstanding, prepetition credit facilities:

About the Debtors

According to the Debtors: “We are on a bold mission to grow the best plants possible for the betterment of humanity….Since 2004, we have been transforming agriculture with people and planet in mind. As a Certified B Corporation, we use the latest breakthroughs in indoor vertical farming, artificial intelligence and plant biology to fix our broken food system and improve the way fresh produce is grown and distributed locally and globally. We have built a proprietary agriculture platform to grow a wide array of products, delivering superior flavor, better quality and improved nutrition with the most sophisticated levels of traceability and food safety in our industry.“

The Blanchard Declaration adds: "AeroFarms is a pioneer in large-scale commercial indoor vertical farming, using proprietary aeroponic technology to grow differentiated leafy greens products while using up to 95% less water and zero pesticides. AeroFarms products are consistently celebrated by top chefs and tastemakers for their quality, taste and texture….AeroFarms operates two commercial farms, which are located in Danville, Virginia and Newark, New Jersey, where they also have their Company headquarters. The Company’s commercial farm in Danville, Virginia opened in Q3 2022 and is a state-of-the-art facility that is in the final stages of commissioning and is expected to be profitable by fall of 2023. As has been previously publicly announced, commercial production at the Newark, New Jersey farm will transition to the Danville, Virginia farm over the coming months….AeroFarms is transforming agriculture by designing and building innovative vertical farms to deliver great-tasting produce at commercial scale."

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The post AeroFarms, Inc. – Garden State Global Vertical Farming Leader Files for Bankruptcy with Over $50mn of Liabilities; Lines Up $10mn of DIP Financing appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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