CHICAGO (May 21, 5:05 p.m. ET) — PET recycler Pure Tech Plastics LLC has slowed production as it looks for a buyer, just two months after it was sued by beverage giant Coca-Cola Co. for breach of contract.
Pure Tech is in discussions with a primary secured creditor, according to a spokesman for Chicago-based Re: Think Recycling Group LLC and its operating company, Perpetual Recycling, which bought Pure Tech in 2008.
Re: Think is “entertaining offers for Pure Tech. We are looking for people to invest to keep this business alive,” the spokesman said.
“We are trying to have discussions with creditors,” the spokesman said. “It is too early to tell what's going to happen.”
The spokesman declined to specify the current level of production in the plant, which is located on Long Island in East Farmingdale, N.Y.
One source said the Pure Tech plant, which shipped roughly 30 million pounds of recycled PET in 2011, was scheduled to make its last shipment of recycled materials today.
Pure Tech, founded in 1989, uses PET bottles collected from deposit programs to make food- and non-food-grade flake and pellets.
“Output was normal and demand was high” at Pure Tech in 2011, said the spokesman, who asked to be unidentified. “Demand is not the issue” in the decision to curtail production.
Indeed, one source told Plastics News that Pure Tech set sales records in many of the months of 2011. “This [slowdown will] put a big hole in that [regional] market.”
Re: Think declined to name the primary secured creditor for Pure Tech, or the potential suitors for the Pure Tech plant, which has recently undergone retrofitting and a refurbishment that doubled its capacity.
However, it is common knowledge, based on court filings, that Coca-Cola is the primary creditor for Pure Tech.
And sources said two of the potential suitors are Nestle Waters North America Inc. and PepsiCo Inc., both of which are looking to incorporate recycled content into their bottles. Those two companies, in separate agreements, also recently agreed to buy nearly 75 percent of the output from the new CarbonLite LLC PET recycling plant in Riverside, Calif.
“We have hired Argus Management Corp. to help us and advise us how to proceed with a restructuring” for Pure Tech, said the company spokesman. Argus is a financial consulting firm headquartered in Grafton, Mass., that provides interim management and advisory services to companies and their owners in dealing with significant financial and operational issues.
Lawsuit with Coke
Coca-Cola filed suit in U.S. District Court in Atlanta on March 19, claiming that Pure Tech has not paid the principal on $3 million loaned by Coca-Cola Financial as part of a two-year revolving credit agreement dated Oct. 14, 2008, and that Pure Tech also owes $1.99 million, plus interest, to Coca-Cola Recycling LLC.
Re:Think bought Pure Tech after entering into the revolving credit agreement with Coca-Cola Financial. The lawsuit said the defendants had made three payments totaling $75,000.
The court has not ruled on a motion filed April 30 by Pure Tech to dismiss the lawsuit.
Coke has asked the court to order Pure Tech to immediately turn over to them “the collateral” pledged as security for the debt. The lawsuit listed as the defendant David Bender, as a registered agent for Pure Tech, based in Glencoe, Ill. Bender is president and CEO of both Perpetual Recycling and Re: Think.
Meanwhile, Perpetual Recycling is currently in the process of equipping a $30 million, 100,000-square-foot plant in Richmond, Ind., to make food-grade PET flake.
The first line at that plant is scheduled to start operating by the end of the year and to be at full capacity by the first quarter of next year. It will have capacity to produce 75 million pounds of food-grade PET flake annually.
“Re:Think was putting money into Perpetual so they couldn't pump any money into Pure Tech,” said one source. “It's too bad because they had [Pure Tech] running smoothly and production was the best they had seen by a long shot. They were setting records every month. But you can't run a business without cash.”
Despite statements that it wants to incorporate more recycled PET into its PET soft drink containers in the U.S. market, Coca-Cola has not entered into a major supply agreement for such material.
In addition, its joint venture plant in Spartanburg, S.C., plagued by technical problems, shut down last March. It resumed operations six months, but is still only operating on a limited basis and produced less than 20 million pounds of recycled PET last year—very little of it food-grade quality.