US-based Enviva Inc. has announced that it has entered into two Restructuring Support Agreements (RSAs) for a pre-arranged restructuring to reduce its debt, improve profitability, strengthen liquidity, and better position the business for long-term success. To implement this pre-arranged restructuring, Enviva commenced voluntary Chapter 11 proceedings on March 12, 2024 in the US Bankruptcy Court for the Eastern District of Virginia. During this restructuring, Enviva is continuing pellet manufacturing operations and fulfilling customer contracts, while advancing its transformation plan.
Enviva currently owns and operates ten wood pellet plants in the United States (US) with an annual combined production of approximately 5.0 million tonnes. These are located in Virginia (VA), North Carolina (NC), South Carolina (SC), Georgia (GA), Florida (FL), and Mississippi (MS), while an 11th plant is under construction in Epes, Alabama (AL), and advanced plans for a 12th plant near Bond, Mississippi (MS).
Enviva sells most of its wood pellets through long-term, take-or-pay off-take contracts primarily in the UK, the EU, and Japan exporting from its own deep-water marine terminals at the Port of Chesapeake, Virginia (VA), the Port of Wilmington, North Carolina (NC), and the Port of Pascagoula, Mississippi (MS), and from third-party deep-water marine terminals in Savannah, Georgia (GA), Mobile, Alabama (AL), and Panama City, Florida (FL).
Restructuring Support Agreements are in place
According to a statement, one Restructuring Support Agreement (RSA) is with an ad hoc group of holders (Ad Hoc Group) representing approximately 72 percent of its senior secured credit facility, approximately 95 percent of its 2026 senior notes, approximately 78 percent of bonds related to its Epes, Alabama (AL) pellet plant currently under construction, and approximately 45 percent of bonds related to its greenfield pellet project near Bond, Mississippi (MS).
The second RSA is with certain holders representing more than 92 percent of bonds related to the Bond project.
The RSAs have broad support across the company’s capital structure and are designed to support an expedited restructuring to reduce Enviva’s debt by approximately US$1.0 billion, as well as improve profitability, strengthen liquidity, and better position the business for “long-term success as the world’s largest producer of industrial wood pellets.”
Commenced voluntary Chapter 11 proceedings
To implement this pre-arranged restructuring, Enviva and certain of its subsidiaries have commenced voluntary Chapter 11 proceedings in the US Bankruptcy Court for the Eastern District of Virginia.
The company has also secured commitments for US$500 million in debtor-in-possession financing (DIP Facility) and other financing accommodations from the Ad Hoc Group, a portion of which will be allocated by the company to eligible stockholders per a syndication process that is subject to Court approval.
The DIP Facility is expected to provide, subject to Court approval, sufficient liquidity to support continued operations across Enviva’s business throughout the restructuring process, as well as help fund the completion of the Epes pellet plant.
These agreements with our lenders and noteholders represent a significant milestone in the ongoing process to transform our business, as we focus on improving profitability, reducing costs, enhancing asset productivity, and optimizing our capital structure. We look forward to emerging from this process as a stronger company with a solid financial foundation and better positioned to be a leader in the future growth of the wood-based biomass industry. We appreciate the support of our lenders, our vendors, and our customers, and the tremendous efforts of our entire team as we continue to execute our transformation plan, commented Glenn Nunziata, Interim CEO and CFO at Enviva.
Enviva is filing with the Court several customary “first-day” motions, which the company expects to be approved in short order. These motions are anticipated to help facilitate a smooth transition into Chapter 11.
Enviva expects to continue to pay suppliers in the ordinary course for authorized goods received and services provided after the filing.
Enviva continues operations, manufacturing wood pellets, and fulfilling customer contracts and plans to continue constructing its Epes plant, with an in-service date expected to be during the first half of 2025 during this restructuring process.
The restructuring is targeted to be completed during the fourth quarter of 2024.
Pause Bond development
Enviva also announced plans to pause the development of its Bond project but intends to revisit restarting Bond, depending on the level of customer contracting, once it emerges from its in-court restructuring process.
The terms of the RSA with the Ad Hoc Group provide for existing equity holders to receive (i) 5 percent of the common equity of the reorganized company at exit from Chapter 11 proceedings and (ii) warrants to purchase an additional 5 percent of the reorganized equity, both subject to dilution from shares issued in connection with, among other sources, a contemplated equity rights offering, equity participation election rights for creditors under the DIP Facility, and a management incentive plan, in each case, subject to Court approval.
Enviva has been in contact with the New York Stock Exchange (NYSE) and anticipates the continued listing of its common stock on the NYSE throughout the restructuring process so long as it continues to meet the minimum continued listing standards set forth by the NYSE.
Enviva’s restructuring process and proceedings are being handled by the company’s claims agent KCC LLC. Vinson & Elkins LLP is serving as legal counsel; Lazard is serving as investment banker; and Alvarez & Marsal is serving as financial advisor to Enviva.
Davis Polk & Wardwell LLP is serving as legal advisor and Evercore Group LLC is serving as financial advisor to the Ad Hoc Group.
