U.S. Bioplastics Producer Cereplast Files for Chapter 11
Bioplastics producer Cereplast has filed for voluntary protection from creditors the Southern District of Illinois under the U.S. Chapter 11 bankruptcy code. The company intends to continue operating as "debtors-in-possession" under the jurisdiction of the bankruptcy court while restructuring its business.
Cereplast said it filed for Chapter 11 in order to "strengthen its balance sheet, clean up its capitalization structure and gain financial flexibility as it continues to realign operations. Court documents show that the company has $10-50 million in liabilities.
The filing suggests that the company may have fallen victim to bad deals in the private equity sector. In May 2013, Cereplast filed a lawsuit charging breach of contract, breach of the covenant of good faith and fair dealing against investment advisers Magna Group LLC and Hanover Holdings LLC and sought compensatory damages.
CEO Frederic Scheer said the reorganisation of the insolvent bioplastics maker will focus on compounded products and recycling polyolefins, as well as manufacturing of bioplastics from renewable feedstocks such as algae and polylactic acid (PLA).
"We have taken a number of steps to improve our operations over the past few months and we were making great progress; however, the lack of traction of bioplastics demand in the United States, the repetitive delays in implementation of the bioplastic regulation in Europe and especially in Italy, combined with the legal problems created by several of our lenders, made clear to our board that reorganisation was the proper path forward," Scheer said.
Cereplast also is negotiating debtor-in-possession (DIP) financing "from several interested parties." If approved by the court, the new financing and cash generated from the company's operations will be used to support the business during the reorganization phase.
