A deal to sell an AppHarvest farm is in jeopardy before crucial deadline

A previously-approved court deal to sell AppHarvest’s large Somerset greenhouse to a Dutch indoor produce grower may have fallen through, attorneys told a bankruptcy judge in an emergency status conference Thursday.

The emergency hearing came one day before crucial debtor-in-possession funding was set to be exhausted. That money is used to keep the facility running throughout the bankruptcy process.

“We are and have been on a clock to find a solution to this problem,” Anthony Grossi, an attorney representing AppHarvest, told the court in the virtual hearing.

In an August 31 auction, Bosch Growers — a Netherlands-based, family-run grower that has been in operation since 1854 — submitted the winning $44.5 million bid for the Somerset farm, court records show. Judge David R. Jones, of the federal bankruptcy court for the Southern District of Texas, signed off on the deal a little more than a week later.

Grossi told Jones Thursday that a new plan to sell the 30-acre cucumber and strawberry greenhouse to Greater Nevada Credit Union, a bank that had previously provided a loan to help build the facility, had arisen. GNCU was previously outbid by Bosch Growers and was listed as the back-up bidder.

Under the proposed new deal, which had yet to be filed in writing before the court as of 5 p.m. Thursday, AppHarvest’s distribution partner Mastronardi Produce would take over operating the farm after it received approval from the USDA to enter the facility, an attorney representing Mastronardi said. GNCU would contribute additional funding to keep the farm running past this week.

After hearing the details, Jones said he wasn’t sure if he’d approve such a deal, noting that it contradicted his previous order.

“You don’t go decide whether or not to comply with an order that I enter,” Jones said. “Unless the order has been reversed on appeal, you follow that order, it is the law.”

The judge later added that he was “extremely unhappy about the way that this has gone.”

Jones told the attorneys on the call that he wanted “something in writing, filed on the docket, signed by everybody under penalty of perjury.” Then they could continue with the status hearing. It wasn’t immediately clear when such an agreement might come together.

Bosch participated in the auction in “good faith” and “did exactly what I asked of them,” Jones said.

“I want (Bosch) to understand that they still have the right to argue to me that they should be the buyer based upon the deal that was announced on the record,” Jones said. “If they’ve agreed to step aside, this is a free country, they have that right.”

No one representing Bosch spoke at the status conference but Tijmen van den Bosch, the company’s president, said in a statement that they “deeply regret” the situation.

“We are happy with what the Judge said and hope we can finalize the deal soon,” van den Bosch said. “Our one and only goal is to transition this company ASAP, securing Jobs and harvest.”

Should funding for the farm expire as any deal is being worked out then GNCU should have to foot the bill, AppHarvest said.

“GNCU should be responsible for providing additional financing for Somerset as they work with Bosch to close the purchase of the Somerset farm,” said Travis Parman, AppHarvest’s spokesperson.

With judge’s approval, liquidation of AppHarvest’s assets marches forward

Why is there a new deal?

The new deal arose from a possible misunderstanding during the auction process, Grossi said. The facility is “encumbered” by a loan from GNCU that is backed by the USDA.

As part of Bosch’s initial bid for the facility — valued at about $30 million — GNCU would pay $9.9 million and then Bosch would assume $20 million in debt owed to GNCU, court records showed.

The auction started with Bosch’s $30 million bid as the low bar. The price went up as the Dutch grower bid against both GNCU and Mastronardi at the auction and eventually settled at the agreed $45 million.

GNCU’s position was that as Bosch increased their bid, they “pivoted away” from GNCU paying $9.9 million, Grossi said. GNCU informed AppHarvest after the sale had been court approved that they feared the USDA would not approve the deal “which is a condition to close,” Grossi said.

AppHarvest’s position was that the auction was clear that Bosch’s higher bid still included that GNCU payment.

“To the contrary, our belief is that it was clear in the auction transcripts, again in the sale order, and then again in our confirmation hearing, together with multiple documents, statements and emails, all consistently demonstrating that Bosch increased the portion of the amount of the pre-petition GNCU debt they were assuming, but never moved away from the $9.9 million payments by GNCU,” Grossi said.

Frances Smith, an attorney representing GNCU, said they may disagree with AppHarvest’s “recitation of the facts” but were willing to move forward and close on the new deal.

The new deal was not favorable to AppHarvest’s unsecured creditors as it would likely lessen the amount of money they would recover from the bankruptcy process, said Chuck Gibbs, an attorney representing a committee of unsecured creditors.

The deal came nearly two weeks after Judge Jones approved AppHarvest’s liquidation plan, which is set to close by the end of this month. The company filed for Chapter 11 bankruptcy protection in July.