The US subsidiaries of German Pellets filed for bankruptcy on Thursday. After construction delays and cost overruns, the Louisiana Pellets Inc. and German Pellets Louisiana LLC cited chapter 11 protection in US Bankruptcy Court in Alexandria, La.
The company missed a bondholders’ payment this year, after Wismar already entered the insolvency process. On February 11th 2016, Wismar’s German Pellets GmbH announced that an administrator has been appointed to assess the company’s holdings and the insolvency proceeding would begin in May 2016 in Germany.
As Peter Leibold, chief executive of German Pellets Louisiana, explained, the plant in Urania, La., operated by Louisiana Pellets Inc., has been facing a lot of difficulties, as it’s still under construction and has faced a lot of delays and expenses. Even if the initial phase of the construction was completed at the end of 2015, the limited production proved to have deficiencies in the electrical system, thus requiring extra work and unexpected costs.
The Urania plant in Louisiana was financed with $390.2 million in bonds and the rates ranged from 7% to 11.5%. At the moment, it owes $340 million including unpaid interest. Even if the full production capacity would be reached in a few months, the second phase of the construction would be ready in over a year. The missing bondholders’ payment has put the plant on a $100 million hold, leaving it without money to maintain its operations.
Thus, Louisiana Pellets Inc. has asked for help from other US affiliates, requesting $300,000 in emergency bankruptcy financing, as to be able to pay the employees, the insurance premiums and still maintain its operations. An answer to their request is expected on Tuesday.