Resin maker DAK Americas LLC has an agreement to buy a Pennsylvania recycling plant for $96 million in a court proceeding from bankrupt PET bottle reclaimer CarbonLite Holdings LLC.
CarbonLite, which says it's the world's largest PET bottle recycler, filed for Chapter 11 protection in March, blaming economic fallout from COVID-19 and low prices for virgin resin.
It said in court documents that DAK Americas was the stalking horse bidder, meaning that it would purchase the Reading, Pa., plant unless a higher bid emerged. An auction is planned for May 17.
The Reading plant is the third and newest recycling plant for CarbonLite, which also has facilities in Riverside, Calif., and Dallas.
Previously, the company said it had invested $80 million in the new Reading facility and had been planning an opening ceremony in April.
In a statement, CarbonLite confirmed the pending sale.
"We can confirm that the Pennsylvania facility will be auctioned, but cannot comment on a pending sale," said CEO Leon Farahnik. "However, we can say that no layoffs are planned. In fact, we are in the process of hiring more employees in Pennsylvania. Again, we are working to ensure that [CarbonLite] emerges from reorganization positioned for a robust and enduring future."
If DAK Americas buys the plant, it would be the latest expansion into recycling for the Charlotte, N.C.-based company, which is part of Alfa SAB de CV of Monterrey, Mexico.
DAK last year said it was investing $32 million in a PET recycling plant in Richmond, Ind., that it acquired in 2019.
Another unit of Alfa has a plant in Argentina making recycled PET pellets and flake for food-grade applications.
A hearing to approve the sale of the Reading plant is scheduled for May 26 in U.S. Bankruptcy Court in Wilmington, Del.
CarbonLite has previously described the 270,000-square-foot Reading plant, which started operating in October, as the world's largest PET bottle-to-bottle recycling plant.
When it filed for bankruptcy, Los Angeles-based CarbonLite said it incurred heavy capital expenses in building the Pennsylvania facility and in a recent expansion of the Dallas plant.
It noted a nine-month delay in opening the Reading plant as staff from European equipment vendors could not travel during COVID-19 to set up the new facility, as well as production slowdowns caused by employee illnesses in the pandemic.
In a recent interview before the bankruptcy filing, Farahnik had complained about the economic challenges in the market, in light of the investments the company was making.
"The return on your investment is disastrous with this pricing in the market," he said.
In the filing, CarbonLite said it had more than $85 million in unsecured claims against it, with the largest unsecured creditors listed as Nestle Waters North America Inc. and Niagara Bottling LLC, which were each owed more than $20 million.
In the stalking horse sale agreement, CarbonLite said it had unilaterally changed the prices it charged to Nestle before the bankruptcy filing, and the company accepted, although it noted that Nestle had decreased the volume of material purchased from CarbonLite this year compared with 2020.
CarbonLite said it had tried to make a pricing change with Niagara but that company did not accept: "Accordingly, since March 2021, [CarbonLite] has not had a business relationship with Niagara."
It also said that key customers Amcor Group GmbH and PepsiCo Inc. in March paused their purchasing from CarbonLite.