Rialto Bioenergy Facility, a subsidiary of Anaergia, initiated voluntary Chapter 11 restructuring proceedings in the U.S. Bankruptcy Court for the Southern District of California.
Rialto Bioenergy Facility is 51% owned by Anaergia’s wholly-owned subsidiary, Anaergia Services, and anticipates that during the restructuring proceeding, it will continue to operate its multi-feedstock bioenergy facility in Rialto, CA, which is capable of converting organic waste, such as food and yard waste and biosolids, into carbon-negative renewable natural gas with the capability to generate renewable electricity and soil amendment/fertilizer.
As a result of a lack of feedstock available to the facility, Rialto Bioenergy Facility has been unable to produce sufficient revenue to cover its costs and debt service. According to the company, the feedstock shortfall is due to a delay in the implementation and enforcement of laws requiring organic waste diversion from landfills by the city of Los Angeles as required under the city’s contracts with private waste management companies as well under California state law SB1383. The city is operating under a corrective action plan stemming from its delayed efforts to adopt and enforce the law’s waste diversion requirements. State law SB1383’s implementation was previously delayed because of the effects of the COVID-19 pandemic. The city adopted an implementation ordinance in late 2022, which is fully enforceable in January 2024
Anaergia anticipates that with future adequate feedstock for the facility, made possible with additional time and relief from debt service and other payments provided under a Chapter 11 restructuring to allow ramp up, the asset will retain long-term value for all stakeholders. Anaergia expects the restructuring to have a positive impact on its 2023 cash flows, as during the restructuring process, it will cease supporting Rialto Bioenergy Facility with further loans or equity contributions. Subject to the company completing its review of relevant accounting standards and guidance, it is anticipated that Anaergia will cease to control Rialto Bioenergy Facility from an accounting perspective and therefore cease consolidating Rialto Bioenergy Facility in its financial statements for the quarter ending June 30.
Subject to court approval, Rialto Bioenergy Facility, as borrower, intends to enter into a debtor-in-possession financing facility with a lender, pursuant to which the lender will make available to the facility a non-revolving secured credit facility. This financing facility will enable Rialto Bioenergy Facility to continue to operate its business and meet its financial obligations, including the timely payment of charges for labor, supplies and other obligations as approved by the court. Additionally, Anaergia will not be guarantying the DIP financing facility, as Rialto Bioenergy Facility has more than sufficient value to support the new loan.
“After careful evaluation by the managers of RBF, with due consideration of a range of alternatives, the RBF board believes that the Chapter 11 process is in the best interests of RBF and its stakeholders. Debt restructuring will allow RBF to address its liquidity challenges, preserve its ability to ramp up operations as the availability of feedstock is expected to increase in tandem with enforcement by the city of Los Angeles of subscription to organic waste collection and landfill diversion requirements mandated by ordinance and state law,” Yaniv Scherson, a board member and vice president of Rialto Bioenergy Facility and chief operating officer of Anaergia, said. “RBF is strongly supported by the state of California and is critical to the success of SB 1383. We are confident that these actions will help protect the value of RBF and allow it to emerge as a stronger company.”
