After months of falling behind on paying its bills, Kentucky industrial hemp giant GenCanna Global USA confirmed this week it’s filed for Chapter 11 bankruptcy.
The move allows GenCanna to continue operating while working through a reorganization plan that could lead to a large debt refinancing or a potential 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, the company’s chief executive, 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.”
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U.S. Rep. James Comer, who was Kentucky’s agriculture commissioner when GenCanna established itself in a former tobacco research facility in Winchester, said Thursday that the company’s handling of its financial woes is distressing.
“For better or worse, GenCanna has been seen as the leader of the CDB industry in Kentucky. And GenCanna has certainly given a black eye to the industry,” Comer said.
Comer said he’s „very disappointed in how GenCanna has left so many contractors from my district high and dry with their plant, when they just walked away from them in Mayfield, Kentucky.”
GenCanna, which was a title sponsor of the 2019 Kentucky State Fair, disclosed that it had obtained about $10 million in post-petition debtor-in-possession, or DIP, financing from its senior lender.
If a bankruptcy judge approves, the company plans to continue operating during the Chapter 11 process.
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Mangone Miranda said the the restructuring allows the the company 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.”
GenCanna began in 2014 after the state of Kentucky legalized hemp. The plant is non-psychoactive cannabis that is used for medicinal cannabidiol (CBD) oil, fiber for clothing and seed as a nutritional supplement.
While GenCanna set out to become a global player in large-scale CBD production, trouble mounted during the last year or so, starting with delays getting the Mayfield processing facility up and running and a fire at its headquarters in Winchester.
Several farmers contracted to grow hemp for GenCanna also sued, alleging they’d been given poor seed and that the company had reneged on promises.
Comer was asked about GenCanna promoting its image as the state’s dominant hemp leader with advertising at Rupp Arena in Lexington and on Kentucky Sports Radio, as well as its second-place bidding on the Grand Champion ham at the Kentucky Fair Board breakfast last August, which went for $1 million.
“It’s pretty sickening to see the spending spree they’ve been on, knowing how much money they owe farmers and contractors in Kentucky,” Comer said.
GenCanna’s Mangone Miranda emailed a company update early Thursday, announcing the Chapter 11 filing and assuring customers that the company expects to continue operations and fill orders. He blamed the problems on a struggling industry.
„GenCanna is not exempt from those struggles. Hemp and CBD are trapped in a regulatory purgatory that does not fully allow CBD to be used as a supplement or food yet. With more work and time, the market will correct and eventually expand to meet its potential,” he wrote.
This story will be updated.
Grace Schneider: 502-582-4082; email@example.com; Twitter: @gesinfk. Support strong local journalism by subscribing today: www.courier-journal.com/graces