The restructuring paired a $900,000 DIP facility from new majority owner Monomyth with an operational reset and a five-year disposable-income plan confirmed under Section 1191(b). General unsecured creditors, holding roughly $8.6 million in claims, were assigned to a sponsor-guaranteed $155,000 recovery pool, a treatment that drew objections from the U.S. Trustee and the debtor's largest equipment lessor before the court confirmed the plan as a cramdown. The plan , and a described a partner-farm network and continued investment led by Monomyth.
Smallhold, Inc. (Delaware public benefit corporation)
Court
U.S. Bankruptcy Court, District of Delaware
Case Number
24-10267
Judge
Hon. Craig T. Goldblatt
Petition Date
February 18, 2024
Effective Date
September 6, 2024
Confirmation Date
September 2024 (amended confirmation order entered November 20, 2024)
DIP Facility
$900,000 commitment from Monomyth Sponsor Group, LLC
Case Snapshot
Monomyth Takeover and the Path to Subchapter V
Smallhold was founded in 2017 by Adam DeMartino and Andrew Carter and grew from a Brooklyn shipping-container farm into indoor farms in New York City, Austin, and Los Angeles. At its peak the brand was valued at $90 million and sold into roughly 1,400 stores before the founding pair stepped aside in early 2024. By the petition date its specialty mushrooms reached more than 500 retail locations across 10 states.
The First Day Declaration describes a control change in the weeks before filing. Monomyth, LLC acquired shares on February 7, 2024 to reach 90.77% of Smallhold's common stock, the founders resigned from the board around February 10, 2024, and the company installed Gustavo Reichmann as interim CEO and Tariq Jawad as interim CFO. Smallhold retained Pashman Stein Walder Hayden, P.C. as counsel and entered chapter 11 as a Delaware public benefit corporation with no secured funded debt and approximately $1.4 million in unsecured trade debt against roughly 81 employees.
Smallhold's first-day motion package focused on keeping logistics moving while the company shrank its physical footprint. An interim order authorized — but did not require — payment of up to $150,000 in prepetition shipper claims, conditioned on continued service on historical trade terms and allowing the estate to recover amounts paid if a shipper failed to perform.
The supplemental First Day Declaration describes an orderly shutdown of the Texas and New York farming operations while the Los Angeles farm stayed open as a bridge to an interim strategy built around partner-farm relationships and renegotiated shipping and packaging costs. To cut overhead, the debtor moved to reject its Brooklyn office lease with ACP BK I LLC and a schedule of vendor contracts effective February 29, 2024. A post-emergence announcement later confirmed that farms in Texas, New York, and California all closed during the reorganization as the company shifted to a partner-farm network supplying more than 700 retail locations.
Monomyth's Revenue-Tiered DIP Facility
The debtor financed the case with a $900,000 DIP facility from the Monomyth Sponsor Group, LLC — an affiliate of its new majority owner. The interim order made $300,000 available, with the remaining $600,000 unlocked on entry of the final order, subject to budget compliance. Draws were capped at one per seven-day period, with a $100,000 minimum and a $200,000 ceiling other than the initial advance, and repaid amounts could not be reborrowed.
Pricing stepped with the company's revenue rather than a fixed spread. The DIP motion set the rate against trailing two-week average revenue, starting at 17% and declining to 14% as revenue rose, with a 2% default premium available at the lender's election. The final order added a 1% commitment fee and a facility fee payable at maturity, and approved superpriority liens intended to survive plan confirmation.
Two-week average revenue
Interest rate
$75,000 or less
17%
Over $75,000 to $100,000
16%
Over $100,000 to $125,000
15%
Over $125,000
14%
The final order imposed a detailed reporting and variance package: an updated 13-week cash forecast every other Thursday, written explanations for variances above 10%, line-item receipts held at no less than 90% of budget, line-item disbursements (excluding professional fees) held within 110% of budget, and a rolling four-week receipts test of at least 90%. It also carried a carve-out for estate professionals and the Subchapter V trustee — budgeted amounts before a carve-out notice, then capped at $50,000 afterward and $20,000 in any chapter 7 conversion. Missing the facility's milestones — a final DIP order by April 30, 2024, a plan on file by May 26, 2024, confirmation within 40 days of the plan, and an effective date within 30 days of confirmation — would have been an immediate event of default.
The August 2024 monthly operating report showed a net cash outflow for the month and DIP payables of $939,000 — at the ceiling of the $900,000 commitment plus accrued amounts.
August 2024 operating report
Amount
Beginning cash
-$227,262
Cash receipts
$691,266
Cash disbursements
-$1,163,885
Net cash flow
-$472,619
Ending cash
-$245,357
DIP financing payables
$939,000
Subchapter V Plan and the GUC Recovery Pool
The confirmed plan applied all of Smallhold's projected disposable income over a five-year period beginning in the fourth quarter of 2024 to creditor distributions, with Monomyth structuring the exit so the reorganized debtor would carry no secured debt. The DIP loan converts into convertible notes on the effective date, maturing at a conversion date five years out, and Monomyth committed an additional $500,000 of exit financing in the form of convertible notes. Those notes convert to equity if not repaid, with pricing tied to a future "Next Equity Financing" of at least $4 million — a 20% discount to the lowest price per share in that round, capped by a $10 million pre-money valuation on a fully diluted basis.
Administrative claimants, whose components the plan estimated at roughly $1.1 million, could elect cash paid pro rata from disposable income or convertible notes bearing 8% interest, with Monomyth guaranteeing up to $750,000 of cash payments to non-investor administrative holders. General unsecured creditors — whose claims the plan put at $8,639,507 — were assigned to a GUC Recovery Pool capped at $155,000 and fully guaranteed by the sponsor, with $75,000 scheduled for the third quarter of 2025 and the remaining $80,000 spread across the balance of the plan term. The plan separately delayed distributions on the Camber Road claim pending resolution of a related transfers dispute. Equity interests were retained.
Class
Treatment
Status
Administrative claims (~$1.1M)
Cash pro rata from disposable income, or 8% convertible notes; up to $750,000 sponsor-guaranteed
Unclassified
Class 1 — DIP lender secured claim
DIP loan converts to convertible notes, then equity if unpaid
Impaired; accepted
Class 2 — general unsecured (~$8.6M)
$155,000 sponsor-guaranteed GUC Recovery Pool
Impaired; rejected
Equity interests
Retained
Unimpaired
Plan Treatment by Class
Confirmation Objections and the Section 1191(b) Cramdown
Two parties opposed confirmation. The United States Trustee objected that the plan's release package imposed third-party releases without affirmative consent after Purdue Pharma, targeting creditors who voted to accept, creditors who voted to reject but failed to check the opt-out box, unimpaired or deemed-accepting parties asked to opt out through notice rather than a ballot, and creditors who did not vote at all. The U.S. Trustee also challenged the debtor's characterization of the plan as a global compromise under Section 1123(b)(3)(A) and asked the court to deny confirmation or strip the nonconsensual release features.
Camber Road Partners, the debtor's principal equipment lessor and an unsecured claimant, separately objected that the plan was neither fair and equitable nor feasible and improperly shifted value away from non-insider creditors toward a sponsor-backed structure. The debtor's limited objection and response defended the five-year disposable-income framework, the guaranteed unsecured pool, and the separate treatment of the Camber claim while transfers litigation remained pending.
The certification of ballots showed Class 1, the DIP lender, accepting the plan and Class 2, general unsecured creditors, rejecting it — foreclosing a consensual Section 1191(a) path and requiring confirmation under Section 1191(b). The court confirmed the plan as a cramdown, finding it did not unfairly discriminate and was fair and equitable under Subchapter V, and later entered an amended confirmation order on November 20, 2024. Discharge was framed around the last distribution date, expected in the fourth quarter of 2029, consistent with Section 1191(b) timing. The Notice of Effective Date set September 6, 2024 as the effective date, October 7, 2024 as the administrative expense bar date, and September 23, 2024 as the rejection-claim bar date.
Opt-Out Releases After Purdue Pharma
Judge Goldblatt issued a memorandum opinion on opt-out third-party releases. The court read Purdue Pharma as leaving consensual third-party releases intact while rendering nonconsensual releases unlawful, and rejected the idea that silence — a failure to check an opt-out box — supplies the consent needed to surrender a creditor's claims against non-debtors. For creditors who actually cast a ballot, however, the court concluded that an affirmative vote combined with clear release disclosures and an opt-out checkbox could establish consent under ordinary contract principles.
Mountain Meadow Remand and Post-Emergence PACA Compliance
Smallhold continued operating under Monomyth's direction following the September 2024 effective date. In February 2026, the company posted a $50,000 surety bond with the USDA Agricultural Marketing Service to obtain a PACA license — a compliance requirement arising from the bankruptcy.
A post-reorganization contract dispute arose when Mountain Meadow Mushroom Farms, which had contracted with Smallhold during the case, brought claims against the reorganized debtor. The Delaware Bankruptcy Court remanded the dispute to California state court in July 2025, finding that post-effective date claims against the reorganized debtor fell outside its narrow post-confirmation jurisdiction, even though the underlying contract had been executed during the bankruptcy.
Who is Monomyth and what role did it play?
Monomyth acquired shares to reach 90.77% of common stock shortly before the filing and became the DIP lender and plan sponsor. It provided the $900,000 DIP facility, converted that debt into convertible notes, funded $500,000 of exit financing, and guaranteed both the administrative cash backstop and the unsecured recovery pool.
What was the DIP financing structure?
The facility carried a $900,000 commitment with $300,000 available on an interim basis, revenue-tiered interest from 14% to 17%, draw minimums and frequency caps, and a rolling 13-week budget with receipt and disbursement variance tests. The final order added a 1% commitment fee and a facility fee payable at maturity.
What do unsecured creditors receive?
General unsecured creditors, holding roughly $8.6 million in claims, share a sponsor-guaranteed GUC Recovery Pool totaling $155,000 — $75,000 in the third quarter of 2025 and $80,000 over the remainder of the five-year plan term.
How was the plan confirmed?
Because Class 2 general unsecured creditors rejected the plan while Class 1 accepted, the court confirmed it under Section 1191(b) as a cramdown, finding the plan did not unfairly discriminate and was fair and equitable under Subchapter V standards.
What did the opt-out release opinion decide?
Judge Goldblatt's memorandum opinion held that silence cannot establish consent to a third-party release after Purdue Pharma, but that a creditor who votes after receiving clear disclosure and an opt-out checkbox can be treated as consenting. The ruling limited the confirmed releases to voting creditors who did not opt out.
Has Smallhold emerged from bankruptcy?
A September 2024 announcement described Smallhold's emergence with a partner-farm network and continued investment led by Monomyth.
emphasized the court's reliance on ballot and notice mechanics https://www.youngconaway.com/publications/bankruptcy-case-update-judge-goldblatt-considers-consensual-releases-post-purdue/
cited the ruling as a significant post-Purdue clarification https://bankruptcyroundtable.law.harvard.edu/2025/06/24/judge-goldblatt-reconsiders-what-constitutesconsent-post-purdue-pharma-us/
noted implications for sureties who voted without opting out https://www.csglaw.com/newsroom/csg-law-alert-delaware-bankruptcy-court-clarifies-meaning-of-consensual-third-party-releases-under-purdue-pharma-and-what-sureties-should-consider-to-preserve-recovery-rights/
observed that voting on the plan, not inaction, establishes consent https://www.restructuring-globalview.com/2024/10/judge-goldblatt-reconsiders-what-constitutes-consent-post-purdue-pharma-us/
posted a $50,000 surety bond https://www.ams.usda.gov/content/new-york-firm-posts-50000-surety-bond-obtain-paca-license
remanded the dispute to California state court https://www.law360.com/bankruptcy-authority/articles/2371166/bankruptcy-judge-sends-post-reorg-dispute-to-calif-court
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. See the disclaimer.