Oil and Gas

Units of Italy's Mossi Ghisolfi files for U.S. bankruptcy

WILMINGTON, Del, Oct 31 (Reuters) - The chemicals business of Italian plastics multinational Mossi Ghisolfi filed for U.S. bankruptcy late on Monday due to a cash crunch caused by overruns at an unfinished Texas factory for making resins used in drink bottles, according to court documents.

The bankruptcy by M&G Chemicals S.A. of Luxembourg and 11 affiliates will allow it to borrow $100 million to use as working capital and to fund the sale of the facility in Corpus Christi, Texas, according to filings in the U.S. Bankruptcy Court in Delaware.

A company spokesman declined to comment.

Indorama Ventures of Thailand, Reliance Industries of India and Alpek SAB de CV of Mexico are interested in Mossi Ghisolfi’s U.S. assets, Reuters reported last week.

M&G Chemicals operates in 14 countries with plants in the United States, Brazil and Mexico, and generated $1.6 billion in revenue in 2016.

Its privately owned parent, Mossi Ghisolfi, was founded by the Ghisolfi family in 1953 and is known for introducing in Europe PET plastic, which is used for drink bottles and food packaging.

M&G Chemicals had planned to spend $1.1 billion to build the world’s largest facility for manufacturing PET resin.

The Texas plant had been expected to begin operating by 2016.

However, after spending $1.86 billion, the facility is less than 85 percent complete, according to court filings. The company said it needs $505 million to finish construction.

M&G Chemical blamed market forces and low productivity for pushing labor costs to an average of $104 per hour, nearly double the budgeted $55 to $60 per hour. Adding to the construction problems, a subcontractor walked off the job in December and Hurricane Harvey slammed into Texas in August.

By filing for bankruptcy, the company was able to pledge its assets to secure $100 million in debtor-in-possession or DIP financing from a unit of Mexican lender Banco Inbursa S.A.

The DIP loan sets a roughly three-month deadline for gathering bids for the Corpus Christi facility, according to court filings.

M&G Chemical said it had $1.7 billion in financial debt, much of it used for construction of the Corpus Christi plant, according to court records. The largest lenders include the Industrial and Commercial Bank of China Ltd, which provided a $350 million unsecured credit facility.

The company also said it owes approximately $250 million to suppliers of raw materials. (Reporting by Tom Hals in Wilmington, Delaware; editing by Susan Thomas)