By Katie Northcott, News Director
On Nov. 24, Fawn and Keith Weaver, owners of Uncle Nearest Premium Whiskey, made a motion requesting relief from Uncle Nearest’s receivership.
Judge Charles Atchley, Jr. appointed Phillip Young, Jr. as the receiver of Uncle Nearest in August after Farm Credit Mid-America filed a lawsuit against the company. Since August, Young has been reviewing the company’s operations and trying to find a way to pay back the company’s debt.
Find a summary of Young’s first quarterly report here.
The Weavers, along with Grant Sidney, Inc., requested relief from the receivership on the basis that Farm Credit’s claim that it is owed over $100 million has not been adjudicated. They said they did not have adequate time to respond to Farm Credit’s filing before a receiver was appointed.
“This combination of conflict-induced loss of counsel, lack of specialized replacement counsel, and compressed timing deprived Defendants of a meaningful
opportunity to investigate the allegations, prepare defenses, identify counterclaims, or develop an adequate record before the receivership hearing,” the Weavers’ motion read.
In its response on Tuesday, Dec. 2, Farm Credit said that the Weavers’ emergency motion was unnecessary but deferred to Young’s about whether the motion should be granted. Farm Credit did address the Weavers’ allegations that the $100 million claim had not been adjudicated, saying it had never attempted to limit the Weavers’ ability to file a response to the claims.
Farm Credit said that Keith Weaver had acknowledged that Uncle Nearest owed a $110 million debt to Farm Credit at the hearing on the motion to appoint a receiver.
“Further, the assertion that Defendants had no advance notice of FCMA’s filing of the Complaint or seeking a receiver is simply not true,” Farm Credit’s response read. “FCMA communicated many times prior to the filing of the Complaint that, if the Defendants could not comply with the Forbearance Agreement or otherwise give requested information, it may seek appointment of a receiver.”
Farm Credit also claimed that the Weavers’ new attorney, Michael Collins, who was appointed in October has yet to contact Farm Credit.
In their motion requesting relief from the receivership, the Weavers alleged that Young was hurting the company by taking steps to sell the company’s assets.
“While a refinance might not cause material damage to the Movants or the shareholders of the Companies, a sale of the assets of the Defendants while in a receivership proceeding during a time when the spirit industry overall is in a lull will undoubtedly result in a price that does not accurately reflect the full market value of the Company,” the Weavers’ motion read.
The Weavers argued that the receivership was further damaging the company by allowing its competitors access to confidential information.
“The Movants are further aware that several competitors in the spirits industry have
already engaged with the investment banker retained by the Receiver and have sought, or are seeking, access to the data room containing confidential and competitively sensitive information about the Defendants’ pricing, distributor relationships, production planning, supply chain, and other trade secrets,” the Weavers’ motion read.
Young responded in opposition of the Weavers’ motion. He said he was still in the midst of investigating the company’s financial situation and would not pursue a full refinance until that investigation is completed. He is unsure at this time if a refinance would allow the company to pay back its debt.
“Regardless, the Receiver will bring a motion before this Court prior to taking any action to refinance debt or sell assets; so the Movants will certainly have an opportunity to be heard at that time,” Young’s response read.
Young said he had gone to “great lengths” to ensure confidentiality for Uncle Nearest. He said each party involved in reviewing Uncle Nearest’s financial situation had been asked to sign a non-disclosure agreement (NDA) prior to being given even preliminary information.
“If the Movants know the names of competitors who have had discussions with the Receiver’s professionals (rather than merely speculating that such discussions might be occurring), they should be ordered to divulge the source of that information to the Receiver so that he can remedy any confidentiality breaches immediately,” Young’s response read.
Young also expressed concern about the negative press the Weavers’ filings would draw. He said there are “scores” of other shareholders looking to file lawsuits should the receivership be lifted.
The Weavers doubled down on their emergency motion in a 26-page motion filed on Tuesday, Dec. 2. The new motion said that the Weavers had documentation of misconduct between a previous Chief Financial Officer at Uncle Nearest and Farm Credit.
They said this misconduct along with some other evidence may mean that Uncle Nearest’s debt to Farm Credit is substantially smaller than Farm Credit alleged. The Weavers said they could settle their dispute with Farm Credit without opening themselves up to more lawsuits.
“It is entirely appropriate for the Court to modify the stay to allow the dispute between Farm Credit and the Defendants to proceed to judgment while still staying other litigation directed against the Receivership Estate and the Defendants,” the Weavers’ motion read.
All of the filings referenced in this article are attached below:
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