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September 14, 2022 – The Court hearing the CalPlant I Holdco cases issued a second order that amends an existing final debtor-in-possession (“DIP”) order and authorizes the Debtors to access a further $18.3mn of DIP financing [Docket No. 403]. The extra financing, which with the exception of quantum has substantially identical terms as earlier DIP borrowings, is being provided by the holders of existing DIP bonds (the “DIP Bondholders”) and comes in the form of a Second Supplemental DIP Bond (aka "CalPlant Senior Secured Bonds, Series 2022B") issued pursuant to a Third Supplemental Indenture (attached as Exhibit 1 to the order).
The need for extra funding comes following numerous operational and construction-related setbacks, that impact the current saleability of the Debtors’ assets (ie its MDF manufacturing plant); with the Debtors (and their DIP lenders) preferring to “further delay their marketing process until after repairs have been completed on their second refiner, additional operational improvements have been made, and plant operations have stabilized.”
The Debtors' requesting motion [Docket No. 394] states in part: "the Debtors seek to obtain (and the DIP Bondholders have agreed to provide) Additional Financing in the amount of $18,300,000 (the 'Second Supplemental DIP Bond') on substantially the same terms as the Existing DIP Bonds to fund these chapter 11 cases through December 30, 2022, which is the date by which the Debtors currently anticipate to have closed a sale of their business; provided, that the Second Supplemental DIP Bond shall have a 'Maturity Date of December 30, 2022 (subject to the terms and conditions of the Prior DIP Orders and the DIP Facility Documents)."
On October 5, 2021, CalPlant I Holdco, LLC and one affiliated Debtor (“CalPlant” or the “Debtors”) filed for Chapter 11 protection noting estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. At filing, the Debtors, builder/owners of "a first-of-its-kind manufacturing plant that produces environmentally-friendly medium density fiberboard (‘MDF’) from rice straw" (the "Plant"), noted that they had "encountered various struggles completing construction of the Plant and achieving their operational goals," with the result being that they had fallen substantially short of achieving "Plant Acceptance" by July 2019 as anticipated when they lined up bond financing in 2017.
From the outset, the Debtors have intended to use Chapter 11 for an asset sale, but that process has been delayed as the Debtors, with the support of prepetition and DIP bondholders, have chosen to do further work on the Plant before putting it up for sale.
At filing (ie October 5, 2021), the Debtors filed a motion seeking Court approval for $37.4mn in DIP financing (the “Original DIP Bonds”) to fund their cases
through March 2022, with the Court issuing a final DIP order in respect of that amount on October 27th. On March 25th, the Court gave the go ahead for an additional $15.0mn bond (the "Supplemental DIP Bond") to fund the cases "through late September 2022."
The Debtors have yet to file a bidding procedures motion.
The Debtors have an aggregate principal amount of $343,850,000 of funded indebtedness outstanding, plus approximately $36,390,433.15 in accrued interest (calculated at the original coupon rate) plus incremental default interest, reimbursable costs and expenses. The funded debt was incurred to finance the construction and operation of the Plant and was issued by the California Pollution Control Financing Authority (the “CPCFA”) in the form of tax-exempt “green” bonds. As of the Petition Date, the Debtors also have outstanding trade payables of approximately $1.6 million.
- The 2017 Senior Bonds. Pursuant to an Indenture, dated as of June 1, 2017, by and between the CPCFA and BOKF, N.A. (as successor to UMB Bank, N.A.), in its capacity as Senior Trustee (the “Senior Trustee”) (as amended and supplemented, the “Senior Indenture”), the CPCFA authorized and issued the Solid Waste Disposal Revenue Bonds (CalPlant I Project), Series 2017 (AMT) (Green Bonds) (collectively, the “2017 Senior Bonds”), in the original aggregate principal amount of $228,165,000. The CPCFA loaned the proceeds of the 2017 Senior Bonds to CalPlant pursuant to a Loan Agreement, dated as of June 1, 2017, by and between the CPCFA and CalPlant (as amended and supplemented, the “Senior Loan Agreement”).
- The 2019 Subordinate Bonds. Pursuant to an Indenture, dated as of August 1, 2019, by and between the CPCFA and UMB Bank, N.A. (the “Subordinate Trustee”) (as amended and supplemented, the “Subordinate Indenture”), the CPCFA authorized and issued the Solid Waste Disposal Revenue Bonds (CalPlant I Project), Series 2019 Subordinate Bonds (AMT) (Green Bonds) (collectively, the “2019 Subordinate Bonds”), in the aggregate principal amount of $73,685,000. The CPCFA loaned the proceeds of the 2019 Subordinate Bonds to CalPlant pursuant to a Loan Agreement, dated as of August 1, 2019, by and between the CPCFA and CalPlant (as amended and supplemented, “Subordinate Loan Agreement”).
- The 2020 Senior Bonds. Pursuant to the Senior Indenture, on October 13, 2020, the CPCFA authorized and issued the Solid Waste Disposal Revenue Bonds (CalPlant I Project), Series 2020 (AMT) (Green Bonds) (collectively, the “2020 Senior Bonds” and, together with the 2017 Senior Bonds, the “Senior Bonds”), in the aggregate principal amount of $42,000,000. The CPCFA loaned the proceeds of the 2020 Senior Bonds to CalPlant pursuant to the Senior Loan Agreement. Pursuant to the Senior Indenture, subject to certain exceptions, the CPCFA assigned its interest in the Senior Loan Agreement to the Senior Trustee as security for the 2020 Senior Bonds (on a pari passu basis with the 2017 Senior Bonds).
- The Collateral Agency Agreement. The Senior Bonds and 2019 Subordinate Bonds (collectively, the “Bonds”) are further secured under the terms of the Collateral Agency Agreement, dated as of June 1, 2017, by and between CalPlant and BOKF, N.A. (as successor to UMB Bank, N.A.), in its capacity as collateral agent (the “Collateral Agent” and, together with the Senior Trustee, the “Secured Party”) (as amended and supplemented, the “Collateral Agency Agreement”). Pursuant to the Collateral Agency Agreement, the Debtors have granted to the Collateral Agent, for the benefit of the holders of the Bonds, a security interest and lien on substantially all of CalPlant’s assets, including the Site and the Plant, and a pledge of Holding’s membership interest in CalPlant.
Further Revised Budget
About the Debtors
According to the Debtors: “CalPlant and its predecessor company, CalAg, LLC, have spent many years researching, developing and patenting a process to make high-quality MDF using annually renewable rice straw as the feedstock, the disposal of which has posed environmental issues in California for decades. It has worked extensively with machinery manufacturer Siempelkamp to develop a facility with production capabilities well-suited to the MDF markets the plant will be serving. CalPlant is the world’s first commercial-scale manufacturer of no-added-formaldehyde, rice straw-based MDF. For more information, please visit www.eurekamdf.com.”
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