SAN FRANCISCO Oct 16 If buyers do not step
forward for a renewable energy plant in California funded with
nearly $160 million of tax-exempt municipal debt, the facility
and its assets could be put up for auction, the restructuring
expert handling its liquidation said on T ues day.
The EnerTech Environmental Inc facility in Rialto,
California, failed to work out as planned and t he company has
shuttered it, said Geoffrey Berman, a vice president at the Los
Angeles office of Development Specialists Inc.
"They're out of business," Berman said of the facility,
noting that Atlanta-based E nerTech has not filed for bankruptcy.
Berman said he is helping the company liquidate the plant,
which converted biosolids to fuel, and its assets for the
benefit of creditors. They include investors who bought bonds
issued through the California Statewide Communities Development
Authority to help finance the plant.
The EnerTech unit in California had received proceeds from
bonds in conduit financing through the California Statewide
Communities Development Authority. The debt was issued in 2007.
Standard & Poor's Ratings Services in September 2011 lowered
the ratings on two series accounting for $130.125 million in the
senior tax-exempt revenue bonds and $9.0 million in senior
taxable revenue bonds to 'D' from 'CCC-plus'.
This past May S&P withdrew its rating on the debt, noting in
a report that there was "significant uncertainty" whether the
company's California operation would be a going concern.
An October 1 notice filed with the Municipal Securities
Rulemaking Board by Deutsche Bank National Trust Co, the trustee
for the debt, noted EnerTech's failure make payment on the bonds
The Orange County Sanitation District ended a contract in
July with EnerTech due to the inability of the company's Rialto
facility to handle the volume of biosolids sent to it on a
consistent basis, district spokesman Jim Colston said.
The facility was under contract to take 225 tons of
processed sewage sludge from the district per day, which was
processed into a coal substitute, Colston said.
EnerTech could not be reached for comment.
Berman said there is a possibility the company's California
facility could be taken over by buyers looking for a similar
o p eration. Or, he said, the facility may be put up for auction.
Berman said he not aware of any secured claims ahead of
bondholders, adding that it is too early to say how much they
will recover: "Until I know for a certainty, I don't guess."