Gag order for Uncle Nearest as judge considers receivership
A federal judge is considering putting a receiver in control of Tennessee’s Nearest Green Distillery after its creditor claimed it overestimated its inventory of whiskey barrels by more than US$21 million.
Farm Credit Mid-America has alleged that Nearest Green Distillery has defaulted on its loan, and as such has asked federal Judge Charles E Atchley to put Nearest Green under receiver control to ensure collateral does not go missing.
The Lynchburg Times reported that at a hearing on Thursday (7 August), arguments were put forward at the federal courthouse in Chattanooga by Farm Credit Mid-America, requesting for a receiver to be placed over the distilling company to protect the US$100 million it is owed.
During the hearing, it was not disputed that Nearest Green is in default in its US$108m in loans – an amount that increases by US$28,000 each day.
Furthermore, Nearest Green attorney Rocklan King admitted that the US$10m payment that was scheduled to the creditor this week would not be paid on time.
King also told the judge that Chapter 11 bankruptcy had been discussed, but said owners Fawn and Keith Weaver would like to find a way to repay their debt while reassuring the creditor that the company can maintain solvency without a receivership or bankruptcy.
“We are the fastest growing whiskey company in America,” Keith Weaver testified, suggesting that rather than this being the case of a solvency problem, it is a cash flow issue.
He added that placing a receiver to run the business would be “catastrophic” to the Uncle Nearest brand, noting that Fawn is the ‘face of the brand’ and that losing her would “injure the company – 100%”.
Gag order
In addition to the receivership request, Farm Credit Mid-America asked the judge to limit what can be said about the case in a gag order, noting Fawn Weaver had already taken to social media to discuss the case.
“Do I really need to put down an order to keep your mouth shut?” the judge asked, to which both sides nodded in the affirmative.
As such, while receivership is considered, Judge Atchley issued a gag order on Monday (11 August) to ensure the case is not ‘tried in the media’.
At a hearing he ordered the parties, including each of their representatives, officers, and directors, to “refrain from making any statement through any medium, whether oral or written, including, without limitation, social media posts or statements to the press, regarding these proceedings, the lender’s collateral, the proposed receivership assets, or any other party to these proceedings without the permission and approval of this court until the court has ruled on the receiver motion”.
He added: “For the avoidance of doubt, while public statements to the press and on social media are prohibited, all parties are permitted to engage in private discussions with current and potential shareholders/stakeholders, including investors.”
Along with the gag order, the judge has frozen any movement of assets that would impact Farm Credit’s collateral while he ponders the receiver request.
“This prohibition,” he said, “includes, without limitation, sales or other transfers of any of the lender’s collateral and the proposed receivership assets, including any such transfers that are prohibited by the loan documents.”
This, he confirmed, includes “investments, advances, or transfers by Uncle Nearest in, or on behalf of any non-loan party or dispositions pursuing actions or proceedings that affect the lender’s collateral or the proposed receivership assets, to the extent the same would interfere with or disturb these proceedings, without the permission and approval of this court, until the court has ruled on the receiver motion.
“For the avoidance of doubt, the company is authorised to operate its business in the ordinary course; however, no barrel sales shall occur.”
While a date for the decision on receivership was not given, the judge pledged his ruling will ‘come soon’.
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