CarbonLite, a major PET processor producing resin for bottlers and other end users, in March filed for Chapter 11 bankruptcy. The company’s leader said the bankruptcy stemmed from “pressures directly related to the coronavirus pandemic.” The company estimated liabilities of between $50 million and $100 million and assets within the same range.
The company operates three U.S. facilities: in California, Texas and Pennsylvania. The Reading, Pa. plant is the company’s most recent, having opened in early 2020, and it’s the largest of the three locations, covering 270,000 square feet.
During the Pennsylvania site’s development, CarbonLite announced its investment in the facility would total at least $80 million and that the facility would be capable of producing 85 million pounds per year of RPET.
Now, as the bankruptcy case unfolds, court documents show the Reading, Pa. facility is scheduled to be sold at auction this month. CarbonLite attorneys on March 18 filed paperwork beginning the process, and on May 3 CarbonLite filed an asset purchase agreement showing that DAK Americas has bid on the facility.
DAK Americas is an international resin producer in the Alpek Polyester Business group of companies. The company submitted a “stalking horse” bid, the initial bid in a bankruptcy sale of assets. If no higher bids come in, subject to court approval, DAK will purchase CarbonLite’s Pennsylvania facility for $96 million.
The auction is scheduled for May 17, and a sale hearing, in which the court will consider the winning bid, is scheduled for the following week. DAK Americas declined to comment on the bankruptcy proceedings while they are still in progress.
DAK previously acquired and upgraded a U.S. PET recycling facility in Richmond, Ind., formerly known as Perpetual Recycling Solutions. DAK is one of several large prime plastic companies that have invested deeper in the recycling sector in recent years.
Court documents submitted in April show CarbonLite solicited interest in sales of one or more of its facilities, including a thermoform packaging facility operated by CarbonLite subsidiary PinnPack in Oxnard, Calif. But so far, only the Pennsylvania facility has an active sale underway.
CarbonLite declined to comment on whether the company will sell additional assets. But the company issued a statement acknowledging the auction.
“We can confirm that the Pennsylvania facility will be auctioned, but cannot comment on a pending sale,” said Leon Farahnik, CEO of CarbonLite. “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.”
New details on business relationships
Court documents related to the auction also highlight how CarbonLite’s business relationships have changed since the bankruptcy began.
Niagara Bottling, one of CarbonLite’s largest customers, stopped buying resin from CarbonLite in March. According to documents prepared for the auction process, prior to the bankruptcy filing CarbonLite “unilaterally changed the pricing charged to Niagara under its contracts, which pricing changes Niagara did not accept. Accordingly, since March 2021, [CarbonLite] has not had a business relationship with Niagara.”
The document indicates CarbonLite made similar pricing changes with other customers, but that the changes were accepted. Nestlé Waters North America, now owned by BlueTriton Brands, continued to purchase from CarbonLite after the price change, although the document indicates Nestlé Waters “has decreased purchasing from [CarbonLite] in 2021 as compared to 2020.” Coca-Cola also accepted pricing changes, the document states.
The documents do not provide specifics of the pricing change CarbonLite implemented for its customers.
Meanwhile, Amcor and PepsiCo have “paused purchasing” from CarbonLite during the bankruptcy proceedings, according to the sale document.
This story has been updated with a May 6 statement from Leon Farahnik, CEO of CarbonLite.
