Carlyle Group LP's (CG.O) Synagro Technologies Inc filed for Chapter 11 bankruptcy protection on Wednesday with a plan to sell the business to a Swedish private equity firm for $455 million.
Synagro, the largest recycler of organic waste in the United States, has agreed to a sale to an investment fund associated with EQT.
Carlyle's infrastructure fund had borrowed heavily to take Synagro private in 2007 in a $772 million deal.
Carlyle declined to comment.
The company contacted more than 100 potential buyers over the past four months as it sought a buyer, its chief executive, Eric Zimmer, told Reuters. "We cast the net pretty wide."
The sale is subject to higher bids and must be approved by the U.S. Bankruptcy Court in Wilmington, Delaware, where Synagro filed for Chapter 11 protection from creditors.
Synagro, based in Houston, said in a statement it anticipates the sale will be completed in 60 to 90 days.
The company also agreed to a $30 million debtor-in-possession, or DIP, loan with its current lenders to fund operations during its bankruptcy.
The 2007 deal that took Synagro private left it vulnerable when municipalities cut spending on wastewater treatment and other environmental projects in the aftermath of the 2008 financial crisis.
The company manages byproducts of wastewater treatment, converting the residual matter into fertilizer and alternative fuels. The company is the largest in the $2 billion U.S. market.
The company also lost two major contracts in New York City and Detroit. Synagro's Detroit contract was mired in a bribery scandal that weighed on the public image of the company.
Zimmer said Synagro has adjusted to the loss of the New York contract in 2010 and said the Detroit agreement never got underway.
Carlyle brought in Evercore Partners earlier this year to find buyers for Synagro, sources familiar with the matter told Reuters in January.
Synagro said in court documents it had assets of between $10 million and $50 million and liabilities of between $100 million and $500 million.
Moody's said the company defaulted on its debt earlier this month. It said Synagro had a $290 million first-lien term loan due in April 2014 and a $150 million second-lien term loan due in October 2014.
Synagro was founded in 1986 and employs 800 in 34 states, according to its website.
The bankruptcy case is Synagro Technologies Inc, U.S. Bankruptcy Court, District of Delaware, No. 13-11041
(Additional reporting by Gregory Roumeliotis in New York; Editing by Bob Burgdorfer and Leslie Adler)