June 22, 2023 – Further a June 13th auction and a June 22nd sale hearing, the Court hearing the Ryze Renewables II cases issued an order approving the sale of the substantially all of the Debtors’ assets, including their Las Vegas biofuels refinery, to Edgewood Renewables, LLC (the “Buyer” or “Successful bidder,” $36.5mn purchase price) [Docket No. 201, with successful bidder and backup bidder APA’s attached at Exhibits A and B, respectively].
On June 14th, the Debtors notified the Court of the June 13th auction results [Docket No. 175] with a consortium comprised of Savage Services Corporation, Annevow LLC, and Triten Renewables, LLC (not bidding for all of the Debtors' assets) designated as the "next highest" (ie back-up) bidder.
On June 16th, the Debtors filed a transcript of the auction [Docket No. 183] which notes that there were four qualified bidders (no stalking horse) and that the auction commenced with an opening bid of $13.0mn and climbed to $36.5mn during the almost 12 hour (occassionally testy) auction which eventually went to final sealed bids.
Case Status
On March 8, 2023, privately held Ryze Renewables II, LLC and one affiliated debtor (together “Ryze” 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 ($186.4mn of funded debt). At filing, the Debtors, developers (40% complete) of a biofuels refinery located in Las Vegas, Nevada (the “Refinery*”), cited the failure of their initially selected technology platform (now abandoned in favor of a replacement, see “Events…” below) as leading to massive cost over-runs and an inability to proceed with construction of the Refinery with existing financing and, struggling on all fronts, unable to source the requisite additional financing.
*“The Debtors were formed in 2017 in connection with the planned repurposing of an existing biofuels refinery located in Las Vegas, Nevada that, once complete, is anticipated to have the capacity to produce over 7,500 barrels of renewable diesel per day by converting non-edible renewable and waste feedstocks to premium low-carbon fuels. As of the Petition Date, the Facility is approximately 40% complete and is not yet operating”.
On April 11, 2023, the Court hearing the Ryze Renewables II cases issued a final order authorizing the Debtors to access a further $6.0mn of new money, debtor-in-possession (“DIP”) financing from prepetition secured lender Georgia’s Own Credit Union (“GOCU" owed $186.4mn at filing). With a March 11th interim DIP order, the Court had previously allowed the Debtors to access a first $2.0mn tranche of what is in total a $8.0mn new money DIP facility.
Also on April 11th, the Court issued the a bidding procedures order set an auction/sale timetable culminating in an auction on June 12th and a sale hearing on June 20th, with those dates eventually extended.
Asset Sale Background
Bidding Procedures/Sale Motion
The Debtors' requesting motion [Docket No. 56] provides: “The Debtors commenced these Chapter 11 Cases to initiate a comprehensive, Court-supervised marketing and sale process to consummate a value-maximizing sale transaction of their assets, including the Refinery. Although the Debtors retained Guggenheim Securities, LLC (‘Guggenheim Securities’) and Alvarez & Marsal North America, LLC (‘A&M’) prior to the Petition Date, for several reasons, the Debtors were unable to fully launch a prepetition out-of-court marketing and sale process. Thus, the Debtors’ boards of managers (the ‘Boards’) concluded that commencing the Chapter 11 Cases was in the best interests of the Debtors and their various stakeholders because, among other things, the Debtors would have the ability to obtain necessary postpetition financing and maximize value by selling their assets pursuant to section 363 of the Bankruptcy Code.
Accordingly, the Debtors file this Motion to approve the proposed Bidding Procedures, which are designed to facilitate a value-maximizing Sale of the Assets. The proposed Bidding Procedures also allow for the Debtors to identify a Stalking Horse Bidder for the Assets and, in any event, to conduct a competitive Auction in which interested parties will have an opportunity to bid on the Assets. The Bidding Procedures proposed by this Motion are designed to ensure that the sale process is open and fair and encourages interested parties to submit proposals in a manner that maximizes value for the Assets.”
Marketing Efforts
The motion continues: “Prior to the Petition Date, the Debtors diligently evaluated, in consultation with their applicable professionals, a number of options to address the financial issues caused by the dramatic increase in the cost to complete the Refinery. These efforts included engaging A&M in August 2022, as well as Guggenheim Securities in September 2022, to assist the Debtors in their solicitation of interest from investors or to run a sale process. In connection with that contemplated process, the Debtors, with the assistance of Guggenheim Securities, spent significant time preparing transaction materials pertaining to the Debtors to assist interested parties in their assessment of the Refinery.
Unfortunately, before the Debtors could launch an out-of-court sale process, certain corporate governance litigation, together with onerous supplier contracts and a lack of cooperation from certain key contractors, brought the Debtors’ sale and financing efforts to a halt. Additionally, the Debtors were in default under the Prepetition Term Loan Agreement (as defined in the First Day Declaration), and the Prepetition Agent (as defined in the First Day Declaration) was hesitant to provide additional financing due to the uncertainties of an out-of-court sale process. Accordingly, the Boards concluded that commencing the Chapter 11 Cases would be in the best interests of the Debtors and their various stakeholders, thereby allowing the Debtors to obtain necessary postpetition financing and maximize value by selling their assets free and clear of liens, claims, and other encumbrances, shed burdensome executory contracts, and stay all pending litigation.”
General Background
Petition Date Highlights
- Developer of Las Vegas, Nevada Biofuel Refinery Files for Bankruptcy with $186.4mn of Funded Debt
- Cites Failure of Duke Technologies technology (and Subsequent Switch to Topsoe’s HydroFlexTM) at 40% Completed Refinery as Leaving Refinery Critically Underfunded
- Prepetition Lenders Led by Georgia’s Own Credit Union to Provide $8.0mn of DIP Financing ($2.0mn Interim)
- Debtors to Re-Boot Sales Process In-Court
Goals of the Chapter 11 Filing
The Gerber Declaration (defined below) provides: "…the Debtors intend to initiate a comprehensive, Court-supervised marketing and sale process in accordance with Court-approved bidding procedures and subject to certain agreed-upon milestones in connection with the Debtors’ proposed DIP Financing…"
Events Leading to the Chapter 11 Filing
In a declaration in support of first day filings (the “Gerber Declaration"), Klaus Gerber, the Debtors’ Chief Restructuring Officer, commented: “…on June 25, 2018, Ryze Las Vegas, as borrower, Ryze II, as guarantor, and Georgia’s Own Credit Union ('GOCU') entered into that certain Loan Agreement (as amended, the 'Prepetition Term Loan Agreement') to provide financing for the development of the Refinery in the aggregate principal amount of $198 million, 70% of which was guaranteed by the United States Department of Agriculture (the 'USDA'). At the time, such USDA guarantees were only available for emerging, commercially unproven technologies, which disqualified Topsoe’s HydroFlexTM technology. Accordingly, in June of 2018, MMC began construction to repurpose the Refinery using the 'Duke' technology design, which qualified for the USDA guarantee. Despite its novelty, the Duke technology had shown promise and was deployed by DuPont in a number of commercial applications utilizing petroleum feedstocks.
…in June of 2018, MMC began construction to repurpose the Refinery using the 'Duke' technology design, which qualified for the USDA guarantee. Despite its novelty, the Duke technology had shown promise and was deployed by DuPont in a number of commercial applications utilizing petroleum feedstocks.
Approximately seven months after construction of the Refinery commenced, the Debtors became aware of various engineering, mechanical, pollution, and safety issues, among others, at another refinery that used the Duke technology. In response, the Debtors’ management team commenced a technology review and assessment to evaluate various alternative technologies that could be utilized to construct the Refinery, which ultimately resulted in the Debtors’ decision in October 2019 to utilize Topsoe’s HydroFlexTM to complete the Refinery’s construction.
The Refinery’s pivot to an alternative technology source resulted in substantial delays and increased costs that vastly exceeded the Debtors’ available financing. Whereas the Refinery was initially budgeted to cost approximately $151 million to complete, the Debtors now believe that significant additional funds will be required to complete the Refinery. The Debtors have engaged the appropriate engineering professionals to independently develop a revised cost estimate to complete the Refinery….
Unfortunately, before the Debtors could launch an out-of-court sale process, the corporate governance litigation referenced above [relating to a default under the Debtors' Prepetition Term Loan Agreement*] brought the Debtors’ sale and financing efforts to a halt. The Debtors also suffered from onerous supplier contracts and a lack of cooperation from certain key contractors. The Debtors were in default under the Prepetition Term Loan Agreement and the Prepetition Agent was hesitant to provide additional financing due to the uncertainties of an out-of-court sale process. Accordingly, the Boards concluded that commencing the Chapter 11 Cases would be in the best interests of the Debtors and their various stakeholders because it would allow the Debtors to maximize value by selling their assets free and clear of claims, shed burdensome executory contracts, and stay all pending litigation."
* "Before the Debtors could enter into a third Forbearance Agreement with the Prepetition Agent, NC Industries and the Prepetition Agent each attempted to reconstitute the Debtors’ Boards by exercising equity pledges under their respective credit facilities. Litigation ensued and the Debtors’ Boards were ultimately reconstituted pursuant to a Nevada state court order. As a result, and as of the date hereof, the Board of Ryze II is comprised of two independent managers and the Board of Ryze Las Vegas is comprised of three independent managers."
Prepetition Indebtedness
As of the Petition date, the Debtors have outstanding debt obligations in the aggregate principal amount of approximately $186.4mn, consisting of approximately $180.0mn in outstanding secured debt under the Prepetition Term Loan Agreement (plus accrued and unpaid interest and fees), a separate advance (the “Advance”) by the Prepetition Agent in the amount of approximately $836k under the Prepetition Funding Agreement…and approximately $5.6mn in unsecured debt. As noted above, 70% of the Prepetition Term Loan Agreement was guaranteed by the USDA subject to the Debtors' choice of "emerging, commercially unproven technologies" in the development of the Refinery,
Prepetition Shareholders
As reflected in the organizational chart attached below, Debtor Ryze Las Vegas is wholly-owned by Debtor Ryze II. They are both Delaware limited liability
companies. Ryze II is wholly-owned by non-Debtor Ryze Renewables Nevada, LLC (“Ryze Nevada”), which, in turn, is wholly-owned by non-Debtor Ryze Holdings. Ryze Holdings is a privately-held company with five shareholders, including (i) Daniel Brown 2018 Family Trust, (ii) RQNMK, LLC, (iii) ADK Advisors, LLC, (iv) Nemo Perrera, and (v) The Ryze Corporation.
About the Debtors
The Gerber Declaration provides: "The Debtors were formed in 2017 in connection with the planned repurposing of an existing biofuels refinery (the 'Refinery') located in Las Vegas, Nevada that, once complete, will have the capacity to produce 7,500 barrels of renewable diesel per day by converting non-edible renewable and waste feedstocks to premium low-carbon fuels. Such biofuels are one of the most sought-after methods to reduce carbon emissions.
The Refinery, once the repurposing is completed, will produce renewable fuels using Topsoe’s HydroFlexTM hydro-treating technology, which has been shown to increase yield and lower operating costs. The Refinery’s inclusion of a 'feedstock agnostic' pre-treatment plant will enable the Refinery to (x) process fats, greases, and waste agricultural oils and (y) increase business operating flexibility and margins. The production process entails six steps, including: (i) pre-treating the renewable feedstock to remove impurities; (ii) heating and pressuring the clean feedstock; (iii) dissolving hydrogen gas into the liquid feedstock; (iv) pumping the liquid feedstock over a catalyst bed while under high temperature and pressure, resulting in the chemical decomposition of the biomass, which splits into diesel, propane, and water; (v) rearranging (isomerizing) the diesel molecules to improve the cold-flow properties; and (vi) finally, producing renewable diesel with water and renewable propane as the only by-products. This process results in fuel that is 100% renewable and sustainable, is compatible with existing diesel engines, and delivers more efficiency to engines and better mileage than standard diesel due to its high cetane value (80+)."
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The post Ryze Renewables II, LLC – Court Approves Sale of Assets to Edgewood Renewables after Animated June 13th Auction Saw Price Jump from $13mn to $36.5mn appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.