Danimer enters Chapter 11, to begin 'orderly ... wind-down'

Bioplastics maker Danimer Scientific Holdings LLC has reached the end of the line.

The firm filed for Chapter 11 bankruptcy protection on March 18 in U.S. Bankruptcy Court in Wilmington, Del. Danimer officials said in a court filing that the firm "will immediately commence an orderly and value-maximizing wind-down of their businesses … [and] will use their time in Chapter 11 to market a sale or sales of all or substantially all of their assets."

Officials with Danimer in Bainbridge, Ga., could not be reached for comment. The firm operates a polylactic acid (PLA) resin plant there with up to 25 million pounds of annual production capacity. Danimer also operates a plant with annual polyhydroxyalkanoate (PHA) capacity of 55 million pounds in Winchester, Ky.

Danimer has assets valued at $622.5 million and debts of $449.5 million, according to a court filing. The debt amount includes $216.7 million in unsecured debt to U.S. Bank. Danimer's list of debts includes $192,000 to Mitsubishi Chemical, $157,000 to BASF Corp. and almost $100,000 to Total Corbion PLA.

In the first nine months of 2024, Danimer posted sales of $26.5 million, down 26 percent vs. that same period in 2023. The firm posted a nine-month loss of $56.7 million after losing $94.6 million in the year-ago period.

These results have sent Danimer's per-share stock price plummeting from almost $52 on March 20, 2024, to 35 cents in early trading March 19.

Market veteran Conor Carlin said he wasn't surprised by Danimer's bankruptcy filing.

"Despite the environmental benefits of PHA, including its biodegradability in both soil and marine environments, the technology faces persistent hurdles," he said in an email. Those hurdles include high production costs, limited scaling efficiencies and competition from lower-cost fossil-based and bio-based polymers such as PLA and bio-PET, he added.

Carlin, president of consulting firm Clefs Advisory LLC in Boston, also said the bankruptcy "is another example of just how difficult it is to achieve the yields and scale required to compete against incumbents."

"Choosing the public [stock] route was fraught with challenges and has proven to lead to significant losses for investors, which only makes the next effort to scale bioplastics more difficult," he added.

The bankruptcy of a major PHA bioplastics supplier "highlights the challenges of scaling innovation in an emerging market," according to Peter Schmitt, managing director at financial firm Montesino Associates in Wilmington, Del.

"Success in this space requires managing the time needed for innovation, alongside pressures to generate sales and margins," Schmitt said. "Unfortunately, bankruptcies and other disruptions are part of the evolution of new industries and can drive adaptation and strengthen the market over time."

"Lessons learned will help build more resilient business models, ensuring long-term growth," he added.

Danimer made PHA bioplastics under the Nodax trade name. Applications for the material included plastic cutlery, straws, fibers, filaments, films, hot-melt adhesives and injection molded items.

As recently as 2021, Danimer acquired fellow bioplastics maker Novomer for $152 million and announced plans for a $700 million expansion in Bainbridge.

On March 14, Danimer filed a WARN notice indicating it would be closing its manufacturing plant in Bainbridge and lay off all 82 employees there. Forty of those job cuts took place on that date.

Danimer also "is experiencing an unprecedented shortage of liquidity, and [its] cash position is critically low," officials said in the notice. This situation "has resulted in [Danimer] failing to make certain payments on its existing debt obligations and has inhibited [its] ability to continue as a going concern."

"Absent a significant change in circumstances or development, [Danimer] expects to imminently cease operations, including those at the Bainbridge facilities," they added. "The closures are expected to be permanent."

In December, the firm obtained short-term financing to provide time to seek a potential third-party purchaser. Since then, officials said Danimer "has aggressively marketed itself…and explored numerous different transaction structures, including direct investments."

In spite of those efforts, officials said Danimer "received only one indication of interest…which was conditioned on the confirmation and launch of a key customer relationship to supply cutlery to a large quick service restaurant chain."

That interest led Danimer to believe it was making progress towards a definitive contract with the customer. Unfortunately, the customer recently informed the firm that it would not be able to establish the relationship required by the third-party investor. The customer also revised its guidance "significantly downwards" with respect to the expected volumes of product that would be ordered.

Officials said the inability to find new investors "has made it impossible to secure going-concern funding from [Danimer's] lenders or from the only third-party investor [the firm] was able to identify."