Two Kentucky hemp companies — one in Winchester and another in Louisville — are facing bankruptcy proceedings following months of cash flow problems.
On Jan. 24, three creditors filed an involuntary bankruptcy petition in federal court in Lexington to force GenCanna into Chapter 11 bankruptcy.
GenCanna has offices in Winchester and is one of Kentucky’s largest hemp companies; the company has 21 days to file a response to the petition.
Separately, on Jan. 6, Sunstrand owner William “Trey” Riddle filed for Chapter 7 bankruptcy in federal court in Louisville to liquidate.
The news comes as Kentucky Agriculture Commissioner Ryan Quarles laments the “bureaucratic paralysis” Kentucky’s hemp industry faces.
But despite the business difficulties, Gov. Andy Beshear and the Department for Local Government announced a a $1 million grant Tuesday for a Mount Vernon hemp company.
GenCanna Bankruptcy Filing
According to the GenCanna bankruptcy petition, three creditors who are owed collectively more than $50,000 are attempting to have the company declared bankrupt and be forced to reorganize. The creditors are Integrity/Architecture of Lexington, Pinnacle Inc. of Benton, and Crawford Sales of Evansville, Ind.
GenCanna is also in arbitration with a group of Central Kentucky farmers who sued in October for $5 million over a failed joint venture. Separately, GenCanna was sued last year for more than $13 million over debts related to a Graves County processing plant they are building.
Also on Friday, Lexington CPA firm Dean Dorton filed a suit in Fayette Circuit Court alleging GenCanna owes them more than $500,000 for services but noted that because of the involuntary bankruptcy petition an automatic stay is now in place.
GenCanna Global CEO Matty Mangone-Miranda said in an email that payments to hemp growers for their crop under contract to the company are up to date.
In statement emailed late Wednesday, he added: “The petition ... is part of a legal dispute process to which we will respond soon. We were involved in good faith negotiations to resolve this matter and this is an aggressive step that destabilizes that process. We are deeply disappointed with Pinnacle’s decision. The entire hemp industry is facing challenges and the situation in Graves County is one symptom of the larger challenge. It’s actions like this that further put the company and the industry at risk. We believe in Kentucky hemp and we are fighting every day to overcome this situation for our employees, farmers, and vendor partners.”
Sunstrand Files for Bankruptcy
It is unclear if Sunstrand, which specializes in using hemp fiber in a variety of materials, is still operating.
Riddle did not immediately respond to a request for comment on the Chapter 7 bankruptcy filing.
According to that filing, Riddle and Sunstrand have between $100,001 and $500,000 in assets but owe more than $10 million.
A meeting of creditors is scheduled for Feb 6 at 11:30 a.m. in Louisville.
Creditors include thousands owed to the IRS, Jefferson County Sheriff’s Office, Kentucky Department of Revenue, Indiana Department of Revenue, Kentucky Labor Cabinet, Louisville Metro Revenue Commission and Carroll County Fiscal Court, as well a several lenders.
Other major unsecured creditors include the Kentucky Agricultural Development Fund, owed at least $351,500; Caudill Seed & Warehouse in Louisville, owed more than $85,000; Diversified Metals of Louisville, owed almost $415,000; Gibbs Diversified of Spartanburg, S.C., owed almost $1.5 million; Hemp Traders of Paramount, Calif., owed more than $404,000; and many others.
Kentucky’s Hemp Industry “Hurting”
On Tuesday, Quarles issued a letter urging the FDA to “develop a model regulatory framework for oversight of the processing of hemp and manufacturing of Cannabidiol (CBD) which will protect public health, comply with federal law, and foster growth in the industry.”
Quarles was scheduled to meet with FDA Deputy Commissioner Frank Yiannas on Wednesday.
The letter was sent to the Kentucky congressional delegation, asking for help in lobbying the FDA to release guidelines on adding CBD to human and animal food.
According to the letter, the market for CBD has plummeted since the FDA issued a warning in November on consuming CBD and sent warnings to 15 companies, including Daddy Burt in Lexington, for improper marketing claims on CBD-infused products.
“When there is a surplus of a crop and it begins to pile up, the result is obvious: crop prices will fall. We have seen that happen over the last year, a time in which the market price for hemp grown for CBD has dropped by as much as 75 percent, according to some estimates,” according to Quarles’ letter. “The bureaucratic paralysis from a federal agency is hurting this new space in Kentucky agriculture. ... Like any start-up industry, we have some hemp businesses making money while others are barely making ends meet or losing money. As a result, some farmers, who are dependent upon those businesses to buy their crop, are making money while others are barely breaking even on their investment or are losing money.”
According to the Wall Street Journal, the FDA warning has chilled interest from big name players including PepsiCo and Starbucks.
Kentucky Farmaceuticals $1 Million Grant
Meanwhile, Gov. Andy Beshear and the Department for Local Government announced Tuesday that a Mount Vernon hemp company has been awarded a $1 million grant.
Kentucky Farmaceuticals specializes in specializes in storing and processing Kentucky-grown hemp for the purpose of cannabidiol (CBD) oil extraction and refinement. The project is expected to create 50 full-time jobs over the next two years, according to a news release.
The city of Mount Vernon, located in Rockcastle County, will use the funding to purchase equipment to lease to the company.
Written By: Janet Patton, Lexington Herald-Leader
Original Article: https://www.msn.com/en-us/finance/companies/ky-hemp-companies-face-bankruptcy-as-bureaucratic-paralysis-plagues-industry/ar-BBZs5r7