AeroFarms plans to file for bankruptcy in the US in yet another setback for the global vertical-farming industry.
The New Jersey-headquartered business, which cultivates leafy greens in a controlled-indoor environment, said it has requested “voluntary protection” under Chapter 11 bankruptcy proceedings in the United States Bankruptcy Court for the District of Delaware.
“The vertical farming industry has recently faced significant industry and capital market headwinds,” AeroFarms said in a statement yesterday (12 June).
“In addition to the petition, 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 ongoing core business operations.”
Chapter 11 usually opens the door to a potential business reorganisation with another company or partner, with a plan to pay off creditors over an agreed timescale.
The process may save the company from suffering the same fate as vertical-farming peers Eider in the UK, Upward Farms in New York, Netherlands-based Future Crops and France’s Agricool, which have all gone to the wall.
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Infarm in Germany, meanwhile, announced an extended downsizing exercise in May with a decision to quit its home markets in Europe to focus on North America.
AeroFarms added that as part of the first day motions, it has entered a so-called debtor-in-possession (DIP) financing agreement with existing creditors for $10m as “part of a larger round” of funding.
“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,” the company said.
Meanwhile, David Rosenburg, who founded AeroFarms in 2004 with business partner Edward Harwood, is stepping down as CEO to become an advisor to the board.
Finance chief Guy Blanchard will also take on the role of president and will work with a board committee “consisting of Jim Borel and Peter Lacy, both long-term AeroFarms independent board members, to help guide the company through the bankruptcy process”.
AeroFarms, which pulled out of a special purpose acquisition company (SPAC) funding deal in 2021, added: “With the protections afforded in the bankruptcy process, the company is working with its DIP lender investor group on a transaction to enable it to quickly emerge from Chapter 11.”
The company operates an indoor commercial farm in Newark, New Jersey, while another was recently added in Danville, Virginia, which “continues to scale according to plan”.
Blanchard added: “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 be able to build our business to meet that demand.”