Fulcrum BioEnergy Narrowly Avoids Liquidation With Swift Offer
Trash-to-fuel company Fulcrum BioEnergy Inc. told a Delaware bankruptcy judge Thursday that it was close to filing for a Chapter 7 liquidation last week when it received a last-minute offer for its operating assets.
During a first-day hearing in Wilmington, debtor attorney Robert J. Dehney Sr. of Morris Nichols Arsht & Tunnell LLP said that as recently as Sept. 7, Fulcrum was prepared to commence a Chapter 7 bankruptcy case, and that an offer to provide debtor-in-possession financing and acquire the assets came in late Saturday night.
“We’re very pleased to be here today with [a Chapter 11] that is a path to a process to proceeds,” Dehney told the court.
Swift Ltd., an unaffiliated third party, agreed to provide $5 million in postpetition financing and made a floor offer of $15 million to acquire Fulcrum’s operating assets, he said, actions it was not willing to take in a liquidation case.
Fulcrum filed for Chapter 11 protection Monday in Delaware bankruptcy court, listing $456 million of debt after its Nevada plant designed to convert household garbage into aviation fuel ran into costly operational challenges and closed down in May.
At Thursday’s hearing, U.S. Bankruptcy Judge Thomas M. Horan approved a typical slate of motions for first-day relief, including allowing the debtor to maintain its current cash management system, pay its utility bills and maintain its insurance programs.
The court also gave interim approval to the $5 million new money debtor-in-possession loan provided by Swift after some discussion about the appropriateness of granting priming liens to the lender without the consent of the existing lenders, whose prepetition liens would be subordinate to the new package.
Judge Horan said the unusual facts of this case – including a bifurcation of assets and debt among Fulcrum and its parent company – justify the approval of the nonconsensual priming liens.
“I think the interim DIP order strikes an appropriate balance and I will approve it,” Judge Horan said.
Fulcrum intends to test the Swift offer against the market through the Chapter 11 sale process, and also will explore a private sale of some assets held by the parent company that are subject to rigorous regulatory schemes, making the universe of potential buyers exceedingly small, the debtor said Thursday.
The debtor is represented by Robert J. Dehney Sr., Daniel B. Butz, Clint M. Carlisle and Avery Jue Meng of Morris Nichols Arsht & Tunnell LLP.
The case is In re: Fulcrum BioEnergy Inc., case number 1:24-bk-12008, in the U.S. Bankruptcy Court for the District of Delaware.
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