A bankruptcy court in South Carolina is closer to deciding the fate of $12.5 million of municipal bonds.
A temporary restraining order that prevented an auction of the borrower's assets expires Wednesday.
Jasper Pellets, LLC, a wood pellet manufacturer, filed for Chapter 11 bankruptcy May 27 in South Carolina citing financial difficulties due to a contractual dispute with a distributor.
The trustee for the tax-exempt bonds issued for the firm in 2018, US Bank, began foreclosure on the company, organizing a public auction of assets for May 31 that was canceled after Jasper Pellets filed a stay with the bankruptcy court, citing the "irreparable damage" such sale would have on the company as it attempted to restructure with the hopes of beginning production again.
That order gave both parties until the end of Aug. 17 to present a settlement or else leave the decision in the hands of the court.
The Series 2018A and 2018B Solid Waste Revenue Removal bonds were issued through conduit South Carolina Jobs-Economic Development Authority. The state agency and government have no liability for the debt.
The unrated bonds were sold in two tranches by Ziegler.
Series 2018A was $11.14 million of tax-exempts subject to the alternative minimum tax that carried a 7.25% yield on a 7% coupon with a 2038 maturity date. Series 2018B, tax-exempt with no AMT exposure, was for $1.36 million of tax-exempt bonds carrying a 6.75% yield on a 6.5% coupon with a 2023 maturity date. Both had buy-in set at $100,000 and were offered only to institutional investors.
Jasper Pellets used the proceeds to renovate and expand a recently purchased manufacturing facility to handle more solid wood waste and produce and export more compressed wood pellets, used as an energy source for homes and power plants largely in Europe.
In June of 2018, Jasper Pellets CEO and 30% shareholder in the company, Charles Knight, announced the deal in a press release, stating that the company's investment "is projected to create 27 new jobs over the next five years."
The move was lauded by local officials including Gov. Henry McMaster, who
Prior to the bond deal, Knight's firm was based in Florida under the name Ridgeland Pellet Company, according to state business records. In 2017, the company was renamed and Knight along with three other stakeholders sought out the state-authorized tax-exempt bonds to purchase, renovate, and expand an existing wood pellet business located in the 40,000-resident Jasper County.
By 2021, the venture was experiencing fiscal problems, as evidenced by a
The company also drew complaints from local residents about
It was settled outside of court after Jasper Pellets agreed to a $15,000 fine after a state investigation found the company in violation of Title V pollution remittance regulations.
The statute was meant to make sure industries basically "comply with whatever emission limits you have," according to Patrick Anderson, attorney at the Environmental Integrity Project, who worked on the lawsuit.
"The Title V permit requires you to do extra monitoring and record keeping," he explained," to make sure that you do comply."
That decision by the state also halted efforts by Jasper to expand its production capabilities, according to a statement the company made after the decision.
Without expanded facilities to meet obligations, the company ran afoul of a contract with a European importer — a dispute that was cited as a primary reason the company filed for bankruptcy, according to court documents.
In its most recent notice to bondholders on Aug. 5, US Bank stated simply that the "events of default have occurred and continue to exist" and that "the Trustee will continue to inform Holders as material developments occur."
When contacted, US Bank declined to comment further on the matter.
The wood pellet production industry is driven by demand in Europe, where regulations treat them as environmentally beneficial.
