Bioplastics specialist Cereplast files for protection from creditors under Chapter 11

Bioplastics specialist Cereplast has filed for protection from creditors under Chapter 11 of the US Bankruptcy Code. The company said it made the move "to strengthen its balance sheet, clean up its capitalisation structure and gain financial flexibility as it continues to realign its operations". The US company plans to continue to operate although one creditor has petitioned the US Bankruptcy Court in New Albany, Indiana, to convert the case to a Chapter 7 liquidation. Cereplast reported a net loss of US$34 mln on sales of US$2.1 mln for the nine months ended 30 September – the latest financial results that the company reported. Last year the company moved its headquarters to Seymour – where the company operates a bioplastics plant – from El Segundo, Calif. At the time, the company said the move would save the firm at least US$600,000 pa. Now, through the Chapter 11 reorganisation, the company is taking steps to align its cost structure with the realities of market demand. Cereplast expects to redirect its operations in two directions: toward traditional compounded products and recycling polyolefins, and bioplastics made of diversified feedstock including algae and polylactic acid. Chief executive Frederic Scheer said: "We have taken a number of steps to improve our operations over the past few months and we were making great progress; however, the lack of traction of bioplastics demand in the United States, the repetitive delays in implementation of the bioplastic regulation in Europe and especially in Italy combined with the legal problems created by several of our lenders made clear to our board that reorganization was the proper path forward. “We believe that this reorganisation will enable us to reduce our debt and implement operational changes, while maintaining our commitment to the environment." In a motion filed on 14 February, Horizon Technology Finance said that Cereplast is in default on loan agreements. Horizon had planned to auction Cereplast's assets on 11 February and had informed Cereplast of that plan on 23 January, according to Horizon's motion. Cereplast attempted to stop the auction through a restraining order filed on 10 February, which was rejected, according to Horizon's motion. Cereplast then filed for Chapter 11 protection. According to Horizon, its plan to sell the company had generated interested bidders, including at least one that has expressed an interest in continuing to operate the Seymour plant.