AppHarvest Faces Impending Foreclosure and Notice of Acceleration

AppHarvest, the pioneering ag-tech company based in Richmond, Kentucky, is under financial strain following a Notice of Default and Reservation of Rights from CEFF II AppHarvest Holdings, LLC (“CEFF”). The notice, received by AppHarvest Richmond Farm, LLC, the Borrower Subsidiary, alleges defaults related to unapproved increases in the construction budget and delays, a mechanic’s lien, and purported construction deficiencies.

Adding to AppHarvest’s woes, CEFF, an affiliate of Equilibrium Sustainable Foods, LLC, issued a Notice of Acceleration on May 30, 2023, based on the previously asserted events of default. The Notice demands immediate repayment of $66.7 million, comprising principal and accrued interest, along with any further fees, costs, and other obligations under the Equilibrium Credit Agreement.

AppHarvest Richmond Farm‘s assets, including the Richmond Property and the pledge of 100% of the limited liability company ownership interests by AppHarvest Operations, Inc., secure the Equilibrium Credit Agreement. AppHarvest, Inc. also guarantees the agreement. Post-alleged default, CEFF reserves the right to initiate measures such as judicial foreclosure of the Richmond Property or a suit against the Borrower Subsidiary to recover the debt.

On May 30, CEFF filed a Madison County Circuit Court complaint to foreclose on the Richmond Property. If the Borrower Subsidiary fails to settle the amounts due, CEFF has the right to sue AppHarvest, Inc. under the Parent Guaranty to recover the debt.

Further, an event of default under the Equilibrium Credit Agreement could trigger a cross-default under the Master Credit Agreement with Rabo AgriFinance LLC. As of May 30, 2023, the outstanding amount under the Rabo Credit Agreement was $69.4 million. This could potentially lead to the commencement of foreclosure proceedings on the Company’s 60-acre farm in Morehead, Kentucky.

The Company has stated it is working towards a resolution with Equilibrium and will defend against any enforcement action taken. However, the Company acknowledges that it cannot guarantee a timely resolution, favorable terms, or a resolution.

If AppHarvest fails to resolve the alleged defaults under the Equilibrium Credit Agreement or the Rabo Credit Agreement, the Company could face severe repercussions, including bankruptcy or insolvency. This could significantly impact the Company’s liquidity, financial condition, and operations. The company’s next moves will be closely watched as it grapples with this critical financial challenge.