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CalPlant I Holdco, LLC – Court Grants Third (Lengthy) Set of Exclusivity Extensions as Sale Hopes Give Way to Prospect of Liquidation

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December 2, 2022 – The Court hearing the CalPlant I Holdco cases has extended (for a third time) the periods during which the Debtors have an exclusive right to file a Chapter 11 Plan, and solicit acceptances thereof, through and including April 5, 2023 and June 5, 2023, respectively [Docket No. 476]. Absent the requested relief, the Plan filing and solicitation periods were scheduled to expire on November 29, 2022, and January 27, 2023.

There has been a significant pivot in strategy for the Debtors since they last requested an extension of exclusive Plan filing and solicitation time. Gone in this present motion is any mention of the sale process that has been central to earlier requests for extra time…and the Debtors' stated filing date objective. Instead, we now have what the Debtors, a year into their bankruptcy now characterize as a clear binary choice between engaging an Austrian specialist to "reengineer the feeding system and refiner components of their plant’s processing equipment" and liquidation.

That operational prognosis differs rather substantially from what the Debtors described at filing. At that point, the Debtors made clear that they had "struggled to refine rice straw fiber so that the particle geometry is satisfactory for blending with resin and running through the Plant's continuous press." Those issues, however, were supposed to have been close to resolution, with the Debtors stating at filing that they expected to "achieve Plant Acceptance sometime in early 2022 and…start producing 'A-grade' MDF shortly thereafter…"

Case Status

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. The Debtors have yet to file a bidding procedures motion.

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'." On September 14th, that number went up by a further $18.3mn [Docket No. 403] and on November 7th it rose again by $10.2mn to provide the Debtors with an aggregate availability of $70.7mn [Docket No. 449].

The Debtors' next hearing is eet for December 8th; although, with lengthy exclsuivity extensions now granted and no clear case momentum, this may very well be cancelled.

The Extension Motion

The Debtors' requesting motion [Docket No. 472] notes, “…the Debtors believe there are two remaining options for maximizing the value of their assets. The first option is to engage a third-party specialist to reengineer the feeding system and refiner components of their plant’s processing equipment. The second option is an orderly liquidation. At present, the Debtors and their professional advisors are engaged in diligence regarding both options. The Debtors are negotiating a term sheet with Andritz AG (‘Andritz’), a refiner repair specialist based in Austria. The Debtors are preparing budgets, projections, and other financial information regarding both options and presenting that information to their stakeholders. The Debtors hope to make a decision over the course of the next month and firmly believe that any such decision must be fully supported by the holders of a majority of their DIP bonds.

The Debtors acknowledge that these Chapter 11 Cases have been pending for over a year. There is, without question, a material administrative cost and burden associated with an extended stay in chapter 11. For that reason, the Debtors intend to take steps to emerge from bankruptcy as soon as they have chosen a path forward. The Debtors do not believe they need to remain in bankruptcy until their chosen path has reached its conclusion. At present, the Debtors expect to be in a position to file a chapter 11 plan before the end of the year, and to seek confirmation and emergence from bankruptcy in the first quarter of 2023.

The Debtors continue to make significant progress to achieve the objectives of chapter 11. Obtaining the statutory maximum extension of the Exclusive Periods will allow the Debtors to develop a strategy with Andritz to resolve many of the plant’s remaining issues and,
separately, to finalize a chapter 11 plan, which the Debtors anticipate would be filed by the end of this year.”

A hearing on the motion is scheduled for December 8, 2022, with objections due by December 1, 2022.

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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The post CalPlant I Holdco, LLC – Court Grants Third (Lengthy) Set of Exclusivity Extensions as Sale Hopes Give Way to Prospect of Liquidation appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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