AppHarvest will auction its three Kentucky farms as a part of its Chapter 11 bankruptcy proceedings.
Earlier this month, the beleaguered agtech company entered into a binding "stalking horse" asset purchase agreement to sell its flagship facility in Morehead, as well as its 60-acre Richmond farm, to CEFF II AppHarvest Holdings LLC, an affiliate of Equilibrium, one of AppHarvest's largest creditors.
Equilibrium has agreed to buy the properties and their related assets for more than $113 million, which would be satisfied in the form of a credit bid with respect to Equilibrium’s portion of the company’s secured indebtedness, according to a U.S. Securities and Exchange Commission (SEC) filing.
A stalking horse bid is the initial bid on the assets of a bankrupt company, preventing other bidders from underbidding that price, according to Investopedia, meaning Equilibrium is just one of several potential bidders.
Travis Parman, chief communications officer at AppHarvest, told me in an email that AppHarvest is hosting tours and providing details of operations to interested parties. The company's indoor berry farm in Somerset, Kentucky, also will be auctioned as part of the bankruptcy proceedings, he confirmed.
The auction is expected to take place in late August or early September.
I asked Parman if AppHarvest would continue operations at the farms after the properties are sold.
"The future of the operations is dependent on the buyer — not AppHarvest," Parman said. "Because the farms are so massive, it’s likely any new buyer or buyers will want to retain a significant number of the existing employees. The new buyer or buyers will decide how they want to manage operations and will have an option to use the AppHarvest name should they want it.
"Following the sale of each farm, there will be a transition of assets. An AppHarvest entity is expected to remain for some time to handle residual legal and transition issues but is not expected to have operational responsibility."
In Chapter 11 bankruptcies, businesses aim to restructure debt to remain operational, but in some cases, it involves the liquidation of assets to repay creditors.
AppHarvest had about $341 million in total liabilities at the end of the first quarter, as well as $268.7 million in stockholders' equity, with $609.8 million in assets, according to an SEC filing.
As I previously reported, in June, Equilibrium sought the immediate repayment of a $66.7 million loan that was used to construct AppHarvest's Richmond tomato farm. That was just the start of several loan and lease disputes AppHarvest faced this summer, which resulted in the naming of a new CEO and the Chapter 11 bankruptcy filing last month.
AppHarvest already sold its 15-acre Berea farm to its distributor Mastronardi Produce for $127 million in a sale-leaseback transaction in December 2022. When it announced the bankruptcy, AppHarvest said it planned to transition Berea operations to Mastronardi.
In addition to the high-tech indoor farms and their equipment, the Richmond property totals 252 acres and the Morehead property is 366 acres, according to the purchase agreement.
In other news, AppHarvest appears to have dropped off the Nasdaq stock exchange after its share price plummeted to less than a cent. It's now trading as an over-the-counter security, APPHQ, on a broker-dealer network rather than as a listed stock, although it still may be subject to certain SEC regulations.
AppHarvest reported net sales of $13 million and a net loss of $33.6 million during the first quarter of 2023.
