Novvi LLC embarks on strategic restructuring with Chapter 11 filing

Novvi LLC, a renewable base oils producer based in Alameda, California, has filed for Chapter 11 bankruptcy in the U.S. District & Bankruptcy Court for the Southern District of Texas. The filing, influenced by the location of its manufacturing asset in La Porte, Texas, is part of a strategic restructuring plan to enhance its manufacturing capabilities and market presence in the renewable chemicals sector.

Key aspects of the restructuring

1. Chapter 11 Filing: The Chapter 11 bankruptcy, known for facilitating reorganisation, allows Novvi to restructure debts while maintaining operations.

2. La Porte Plant: The La Porte facility, designed for an annual production of 25,000 tons of sustainable products, is currently not operating continuously. The restructuring aims to scale up this production.

3. Liabilities and Shareholder Support: Novvi currently faces USD29.7 million in liabilities. Chevron Corp. and H&R Group, two of Novvi’s shareholders, have agreed to convert debt into equity and inject USD25 million in new capital.

4. Ownership Structure: Amyris Inc., which filed for Chapter 11 in August 2023, holds a 16.1% stake in Novvi, while American Refining Group Inc. (ARG) owns 6.1%. ARG acquired its stake in December 2015, Chevron in July 2016, and H&R Group in February 2020.

5. Debt Details: The bankruptcy filing details include USD15 million in secured convertible notes from Chevron (66.5% stake) and USD1.9 million in senior secured convertible notes plus a USD9.95 million prepetition loan from H&R Group (11.3% stake).

6. Court Approvals and DIP Loan: The court has approved all “first-day motions” related to Novvi’s restructuring. H&R Group will provide a USD16 million line of credit, including USD6 million in new funds and USD10 million in roll-up funding, elevating H&R Group’s equity stake post-Chapter 11.

7. Objections and Government Concerns: ARG filed an objection to the Debtor-In-Possession (DIP) motion, expressing interest in providing DIP funding. The U.S. Department of Justice also raised concerns about the lack of challenge rights in the DIP order.

8. Judge’s Decision: U.S. Bankruptcy Judge Christopher M. Lopez approved a revised DIP motion, providing a 40-day challenge period, and authorised first-day motions for employee payments and critical operational aspects.

9. Restructuring Timeline: The process is expected to conclude by early 2024, pending necessary approvals.

10. Future Strategy: President Jason Wells expressed optimism about Novvi’s future, emphasising the transition to lower carbon solutions. The restructuring will not impact Novvi’s operations and commitments. Novvi plans to shift its focus to higher-value, lower-volume products and invest in production facility upgrades for cost-effective renewable base oil production.

Background

Novvi LLC, established as a joint venture between Amyris and Cosan, became a standalone company in 2011. The company’s strategic restructuring and Chapter 11 filing reflect its commitment to adapting its business model and operations to the evolving market demands in the renewable chemicals industry.