Uncle Nearest Is Struggling To Survive After Defaulting On $108 Million In Loans

Forbes

a day ago

U ncle Nearest founder Fawn Weaver is fighting for control of her Tennessee whiskey brand after a federal judge placed it under receivership on August 14 over defaulting on $108 million in loans. Founded in 2017 by Weaver, Uncle Nearest was created to celebrate the formerly enslaved Nearest Green, who taught Jack Daniel how to make whiskey.
The decision has created a major crossroads for the eight-year-old business, which Weaver had intended to bequeath to the descendants of Green. Farm Credit Mid-America, a cooperative bank, sued the distillery in July over breach of contract, and last week, a Tennessee judge decided the business would be put under a receivership, which would give an independent individual the legal power to make sure the creditor gets repaid, including selling assets like real estate or through restructuring. The judge is now deciding who to appoint and is taking into consideration recommendations from both sides.
For now, there have not been any changes to Uncle Nearest's day-to-day leadership or operations. The receivership currently has a limited scope, and gives Weaver and her husband, Keith, who is a board director and a party in the lawsuit, the chance to argue for how broad it should be.
The Tennessee judge is also now weighing whether he should mandate that the bank engage in mediation with Uncle Nearest, which the Weavers have requested. In a legal response to the lawsuit, the Weavers claim to have started a settlement process several times, without much effort from Farm Credit Mid-America.
According to the filings, Weaver has been fighting the lawsuit from the creditor and retains the backing of 'a group of high net-worth and well-funded investors' who are ready to negotiate with the bank. She denies the allegations in the lawsuit, which include inflating the value of her inventory of whiskey barrels, which were used as collateral against its loans. The bank's lawsuit also alleges that the Uncle Nearest acted against the terms of its loans, including keeping a cash balance under the loan's minimum requirement of $1.5 million.
Weaver, who is CEO, says she can't comment due to a legal gag order. In a filing from earlier this month, the Weavers responded that the claims are 'lies.' The Weavers also deny that Uncle Nearest's assets ever had a value less than $100 million.
In their filings, the Weavers' blame Mike Senzaki, Uncle Nearest's former chief financial officer, for the misreporting that they claim caused the default 'solely and entirely.' The Weavers argue that Senzaki, who was fired as CEO in October 2024, is responsible for any alleged fraud, including the misstated inventory. The Weavers further claim that Senzaki overstated the inventory by approximately $21 million between 2022 and 2023. That overstatement helped Uncle Nearest secure an increase of $24 million to the business's line of credit. And the Weavers' response points out that the bank approved the additional funds without verifying the inventory with the third-party warehouse. The bank's lawsuit, they say, 'tellingly fails to acknowledge that Uncle Nearest was the victim of fraudulent activity and never intended to trigger the technical default.'
The Weavers claim that Uncle Nearest internally investigated Senzaki and have since hired a third-party to do a deeper investigation. Senzaki did not respond to requests for comment for this story and has not filed any formal legal response.
In an email obtained by Forbes that was sent to Uncle Nearest's 160-plus investors after the receivership ruling, Weaver wrote: 'We have had more investors than we can count reach out, offering to buy this loan on our behalf—a group that remains committed to moving forward with the purchase of the debt and is undeterred by this ruling. We selected one of those investors to lead the negotiation with the bank, and they were prepared to buy the loan in its entirety without a discount. However, the bank never came to the table, so it has been a one-way conversation for the past week.'
The email also claims out that the bank and its financial advisors spent the past three months urging Uncle Nearest to file for Chapter 11 bankruptcy. 'Their argument was that it would allow us to control the process and 'clean up' our cap table,' she wrote. 'While that approach might have been more straightforward for us personally and would have allowed us to control the narrative in the press — we chose instead to risk receivership because we were not willing to wipe out our cap table.'
A legal filing for the Weavers and Uncle Nearest notes that Uncle Nearest has paid the bank $16.5 million in the last 18 months. 'And even now, its collateral is not in imminent danger of being lost, concealed, injured, diminished in value, or squandered,' the legal filing reads. 'Given the circumstances, the drastic and extraordinary remedy of receivership is both unwarranted and inappropriate.'
In an Instagram post last week, Weaver, who said the team remains 'unshaken and unmoved' by the lawsuit, shared more: 'I'm a steady leader. Unflappable. This is a blip on the radar. What we're building is so much bigger than the current news cycle—so don't be concerned or dissuaded,' she wrote . 'Distributors and partners often buckle under this kind of news cycle. Ours are doubling down—because you're standing 10 toes down with us.'
Forbes had previously featured Weaver on the 2024 list of America's Richest Self-Made Women list, debuting with a net worth of $480 million, thanks to an Uncle Nearest valuation of $1.1 billion. In that 2024 profile, she was full of bravado about her ambitions for the distillery even as critics warned that she was expanding too fast. 'I'm going to build it large as hell,' she said of Uncle Nearest. 'When I pass it on, I don't want it to be a $10 billion company. I want it to be a $50 billion company.' But as the brand's financials weakened along with the market downturn, Weaver did not make the 2025 list.
Weaver has 'shed light on a story that has helped us seek a more complete history of distilling's legacy,' says Drew Hannush, the author of The Lost History of Tennessee Whiskey . 'She is a force of nature. I just think she had some things get in her blind spot. Hopefully she can course correct,' adds Hannush, who interviewed Weaver on his podcast, Whiskey Lore, in 2021. 'She has been very out front about getting that story to the public, and so if you lose that voice, I don't know how it survives without her as the face of the brand.'
'The sad part about it,' he adds, 'is that it also takes that legacy that's out there and it tarnishes it a little bit.'
I n its 2024 annual report obtained by Forbes , Uncle Nearest claimed to have a sanguine outlook. Before quoting 18th century banker Baron Rothschild in the introduction letter to Uncle Nearest's investors, Weaver wrote 'we remain bullish on what we can accomplish—even as others pull back.'
According to the report, revenue topped $81 million last year. The report does not include comparative financials for the previous year, but Forbes has previously confirmed much of Uncle Nearest's 2023 financials, including revenue, which was $78 million. That would imply an about 4% increase in an industry that has been contracting in the past three years.
'While many in our industry are tightening their belts, we've leaned into the moment—and the results speak for themselves,' Weaver wrote, citing Nielsen data on sales for the American whiskey industry being down 1% in revenue and 2% in volume. 'We share all of this not to pat ourselves on the back, but to remind you—our Sixth Man—of the foundation we're building together. The resilience, innovation, and audacity it takes to not just survive, but to lead.'
Profitability, however, had taken a hit. Net income in 2024 fell more than 50%, from $17 million to $8 million, or a margin from 22% to 10%. And in its annual report, Uncle Nearest projected its net income will fall even further to $7 million in 2025.
According to a legal filing from August 14, when the receivership was put into place, the judge asked whether Uncle Nearest was solvent, and the lawyer for the distillery couldn't answer definitively, indicating that 'Uncle Nearest's solvency was in question and that the business is experiencing cash flow problems.'
The 2024 annual report lists total liabilities for 2024 at $102 million—a little less than the $108 million cited in the lawsuit—and reports that the business projected that debt total to drop slightly in 2025 to $101 million and $100 million in 2026.
The 2024 annual report ended with an update on the hiring search for Uncle Nearest's new chief financial officer. An interim CFO had started two weeks prior to the report's release earlier this year. In addition to hiring a long-term CFO, Uncle Nearest has taken steps to address several of the bank's concerns, including adding an independent director to the board and implementing additional financial controls.
If the lawsuit's claims are inaccurate, Bump Williams, founder of Connecticut-based spirits consultancy Bump Williams Consulting, says then there could be a path forward for Weaver to remain at the helm of Uncle Nearest, and that the bank could pursue legal action against the former CFO instead. However, if the lawsuit's claims are accurate, the distillery could be sold at auction to the highest bidder.
'With gag orders and 'rumors' on what is truth or fiction, it's very hard to assess what's real and what's fabricated,' Williams says. 'It would be a shame to see a distillery like Uncle Nearest be destroyed due to false reporting and rumors and poor financial leadership.'
Uncle Nearest, of course, is not alone in its struggles. Three whiskey distillers in Kentucky — Luca Mariano Distillery, Garrard County Distilling, and Kentucky Owl—have filed for bankruptcy this year.
'We're hitting one of those time periods again where there's going to be so much production, and what that does is, people get caught up in it,' says Hannush. "This is the situation that may have happened with Fawn, in that she's not seen these cycles before. Was it a little too much too soon? And when that happens, it's very easy for you to lose control.'
Or an investor could come forward to pay off the loans. As Weaver wrote in her recent Instagram post, 'Business is hard. And if you've ever heard me answer the question of my #1 piece of advice for entrepreneurs, you know it is: 'If you're of the quitting kind, don't start!' Because entrepreneurship isn't for the faint of heart. You'll have 100 reasons a day to quit. But those of us who don't have a quitting bone in our body know—this is light work.' More From Forbes Forbes How To Build A Whiskey Unicorn By Chloe Sorvino Forbes How Surfside Became The Fastest-Growing Alcohol Brand In America By Chloe Sorvino Forbes How Clase Azul Built A Billion-Dollar Tequila Business Beyond The Top Shelf By Chloe Sorvino