One of the largest hemp processing companies in Kentucky is filing for Chapter 11 bankruptcy.
GenCanna’s filing Thursday in the U.S. Bankruptcy Court in the Eastern District of Kentucky, if granted, would allow the company to operate while seeking options including refinancing or finding an entity to buy the company.
GenCanna launched in Winchester, Kentucky, in 2014 when the state legalized the cultivation of hemp under a pilot program. GenCanna processes hemp into products made from CBD, a compound many users claim has medicinal benefits. The company in past years had invested heavily in marketing throughout the state, buying billboard space in west Kentucky and becoming last year’s title sponsor for the Kentucky State Fair.
Company CEO Matty Mangone Miranda in a statement said the bankruptcy process will allow GenCanna to navigate several ongoing issues that include an uncertain regulatory environment surrounding hemp and CBD and a “legal dispute” in west Kentucky.
“Through this restructuring, we plan to address certain structural issues that we could not fix on our own,” Miranda said. “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.”
GenCanna is also asking a bankruptcy judge to allow the company to take a $10 million loan to maintain operations through the bankruptcy process.
“I wished they had used their marketing budget to pay their bills,” said Kentucky Commissioner of Agriculture Ryan Quarles. “As a farm kid, I learned that you don’t spend your money on branding until you pay off your debts first, and that a handshake means something.”
While he hopes agribusinesses pay all creditors, he said his department will support efforts to make sure contracted farmers are “paid first” regarding the GenCanna bankruptcy proceedings.
“It’s a sad day for the industry, where farmers have been let down, contractors have been let down,” Quarles said. “It’s important to realize that as the industry continues to grow, we remove as many obstacles as possible for our hemp companies.”
Quarles said regulatory uncertainty is hampering the industry, particularly how the U.S. Food and Drug Administration will categorize CBD. The FDA is considering whether to categorize CBD as a more-regulated pharmaceutical, or as a nutritional supplement that could be added into food products. Industry analysts say the financial implications are significant depending on how the FDA will rule.
Construction companies in west Kentucky and other states have filed dozens of liens against GenCanna in Graves County Court, totaling more than $32 million combined as of December, for unpaid construction work at an unfinished hemp processing facility in Mayfield. The company had originally announced in 2018 it was investing $40 million to build the Mayfield facility.
Pinnacle, Inc., based in Benton, Kentucky, had filed a petition in late January to force GenCanna into Chapter 11 bankruptcy. GenCanna on Thursday consented to that petition, along with filing a voluntary bankruptcy petition of their own. GenCanna has faced lawsuits from farmers in the past, alleging the company failed to meet their promises in paying drying equipment.
This story has been updated.