SC wood pellet plant shuts down in last-ditch bid for bankruptcy sale | Company


The war in Ukraine and the resulting energy shortage across Europe are at the heart of the bankruptcy of a small biomass plant in South Carolina that has been closed for almost a year.

Jasper Pellets LLC clings to hopes of finding a buyer soon, by the end of October, and using the proceeds to pay off debt.

This is shaping up to be a tall order.

The Ridgeland-based company, which clashed about two years ago with neighbors, environmental groups and regulators over air pollution, noise, odors and other issues , died at the end of 2021.

The main culprit was a complicated falling out with the foreign company that bought all of its wood pellets to resell mainly as a heating source in Europe.

The contentious split left the Lowcountry manufacturer “without cash flow to fund its operations”, forcing it to close, according to court documents. Last year, sales fell 51% from 2020 to $2.66 million.

Cash-strapped, the company closed in November, around the time it defaulted on more than $12 million in debt. Jasper Pellets filed for bankruptcy before Memorial Day weekend.

“Our goal is to sell the facility as quickly as possible so that we can pay all creditors in full,” CEO and majority owner Charles Knight said in a written statement shortly after the filing.

pile of woodchips.jpg (copy)

Woodchips were among the raw materials that the now-closed Jasper Pellets factory in rural Ridgeland turned into a source of biofuel. File/Personal

Bondholders balk

Knight, of Valdosta Ga., co-founded the company in 2018 as Ridgeland Pellet Co. with plans to invest $8.1 million and create 27 jobs in rural Jasper County over the next five coming years. He and his partners purchased and reopened an existing manufacturing site on Nimmer Turf Road, a few miles west of I-95.

“We are excited about the opportunity to help develop the existing industry in Jasper County, as well as the nearby port infrastructure and the proximity of this project to a number of sawmills that will supply wood chips and other raw materials necessary for our business”, Knight said at the time.

Funding for the startup included more than $12.4 million in tax-exempt bonds issued through the SC Jobs-Economic Development Authority. The debt was then sold to investors represented by US Bank as trustee.

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The company’s problems included production constraints, permit issues and congestion at the nearby port of Savannah, where it shipped all of its products to Danish company CM Biomass under a long-term contract.

Jasper Pellets filed for bankruptcy protection on May 27, listing approximately $15 million in secured and unsecured liabilities. She valued her business assets, mostly machinery, heavy equipment and real estate that can be sold to pay creditors, at $25.1 million.

The company and its former Scandinavian business partner tried to broker a compromise and settle after the filing, according to a court filing. The agreement called for CM Biomass to waive its financial claims and assume the South Carolina exporter’s other invoices in exchange for full ownership of the business.

But bondholders balked, upset that the terms could provide cash to shareholders of the bankrupt company. Jasper Pellets’ attorneys called the objection “absurd” and “vindictive.”

“So we’re back to square one,” said bankruptcy attorney Michael Beal of Columbia-based Beal LLC, which is representing the debtor.

Timeline of short fuses

Beal said Jasper Pellet’s assets likely would have been put on the block at a conventional auction or foreclosure sale had it not been for the Ukraine war, which has driven up energy prices at all the levels after the invasion of Russia on February 24. Almost overnight, the market price of wood pellets roughly doubled to about $300 per metric ton in Europe, prompting questions about the status of the closed plant.

“It definitely caught people’s attention,” Beal said.

The clock is turning. The likely last resort plan for Jasper Pellets calls for a simple bankruptcy auction. The catch is that the sale must be organized and finalized by October 31, a blink of an eye in the federal court system.

At a hearing last week in downtown Charleston, a bankruptcy attorney representing the US government’s Office of the Trustee argued with Jasper Pellets over a proposal to spend $175,000, plus fee, to hire FTI Capital Advisors to sell the company to potential buyers in the United States and abroad. The Washington, DC-based investment bank would be eligible to earn a “success fee” on the back-end, depending on what the auction yields.

“They’re really taking this on an emergency basis,” Beal said.

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The goal is to lock in a so-called stalking horse – a buyer who will guarantee to buy the business at a pre-determined price. The floor would then be open to competing bids.

“We believe a stalking horse bidder adds significant value because of the message it sends to the market: If you want to buy these assets, you better show up at the bankruptcy auction,” Beal said. to Judge Elisabetta GM Gasparini.

The company’s unsecured creditors, who collectively owe around $2 million, are “four squares” behind the plan, saying it is essential to ensure the chances of a successful transaction.

“This is really a short-term selling process,” said Charleston attorney Charles P. Summerall IV, who represents the group.

Secured creditors aren’t saying much at this stage of the game, including whether they’ll leverage the money owed to them to fund a $12.4 million cashless “credit offer” for Jasper Pellets. . U.S. Bank lawyer John Elrod of Atlanta suggested bondholders had lost patience, saying a sell-off by October 31 was ‘material’ and ‘a tough deadline for my clients’ .

Beal is counting on the growing wood pellet market overseas to generate interest and generate revenue equal to or greater than what Jasper Pellets owes. As of last week, 13 potential bidders had signed confidentiality agreements. Others are expected.

“We have a hot pellet market and hope to have a robust auction,” Beal said.

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