Enviva files for bankruptcy protection, pauses construction of Mississippi facility

Maryland-based Enviva, which bills itself as the world’s largest producer of industrial wood pellets, has filed for Chapter 11 bankruptcy protection in Virginia. The company said it has debts exceeding $2.6 billion (all figures U.S.), according to published reports.

That incudes $780 million owed to a bank in Delaware; $348 million to an energy company in Germany; and more than $353 million in bonds from development authorities in Mississippi and Alabama.

Enviva said it has entered into two Restructuring Support Agreements (RSAs): One RSA with an ad hoc group of holders representing about 72 per cent of its senior secured credit facility, approximately 95 per cent of its 2026 senior notes, approximately 78 per cent of bonds related to its Epes, Alabama plant currently under construction, and about 45 per cent of bonds related to its greenfield project near Bond, Mississippi; and a second RSA with certain holders representing more than 92 per cent of bonds related to the Bond project.

The RSAs have broad support across the Company’s capital structure and are designed to support an expedited restructuring to reduce the Company’s debt by approximately $1 billion (all figures U.S.), as well as improve profitability, strengthen liquidity, and better position the business for long-term success as the world’s largest producer of industrial wood pellets, it said in a press release.

‘Voluntary’ Chapter 11 proceedings

To implement this pre-arranged restructuring, Enviva and certain of its subsidiaries have commenced what it called “voluntary” Chapter 11 proceedings in the U.S. Bankruptcy Court for the Eastern District of Virginia. It has also secured commitments for $500 million in debtor-in-possession (DIP) financing and other financing accommodations from the ad hoc group, a portion of which will be allocated by the company to eligible stockholders in accordance with a syndication process that is subject to court approval.

The DIP facility is expected to provide, subject to court approval, sufficient liquidity to support continued operations across Enviva’s business throughout the restructuring process, as well as help fund the completion of Epes, it said.

“These agreements with our lenders and noteholders represent a significant milestone in the ongoing process to transform our business, as we focus on improving profitability, reducing costs, enhancing asset productivity, and optimizing our capital structure,” said Glenn Nunziata, interim CEO and CFO. “We look forward to emerging from this process as a stronger company with a solid financial foundation and better positioned to be a leader in the future growth of the wood-based biomass industry. We appreciate the support of our lenders, our vendors, and our customers, and the tremendous efforts of our entire team as we continue to execute our transformation plan.”

Enviva is filing with the court several customary “first-day” motions. These motions, which Enviva expects to be approved in short order, are expected to help facilitate a smooth transition into Chapter 11. Enviva expects to continue to pay suppliers in the ordinary course for authorized goods received and services provided after the filing, it said.

Epes plant expected to be completed in 2025, Bond plant put on hold

The restructuring is targeted to be completed during the fourth quarter of 2024, and throughout the process, Enviva plans to continue constructing its Epes plant, with an in-service date expected to be during the first half of 2025, it said.

The Company also announced plans to pause development of Bond. The company intends to revisit restarting Bond, depending on the level of customer contracting, once it emerges from its in-court restructuring process.

The terms of the RSA with the Ad Hoc Group provide for existing equity holders to receive (i) 5% of the common equity of the reorganized company at exit from Chapter 11 proceedings and (ii) warrants to purchase an additional 5% of the reorganized equity, both subject to dilution from shares issued in connection with, among other sources, a contemplated equity rights offering, equity participation election rights for creditors under the DIP Facility, and a management incentive plan, in each case, subject to court approval.

Enviva has been in contact with the New York Stock Exchange (NYSE) and anticipates the continued listing of its common stock on the NYSE throughout the restructuring process so long as the Company continues to meet the minimum continued listing standards set forth by the NYSE, it said.