On April 24, 2013, Synagro Technologies (“Synagro”) and various affiliates filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. Synagro recycles biosolid and organic materials generated by municipal and industrial waste water treatment centers. The company describes its services to include “drying and pelletization, composting, incineration, alkaline stabilization, land application, collection and transportation, regulatory compliance, dewatering, facility cleanout services and product marketing.” See Synagro’s Declaration in Support of Chapter 11 Petitions and First Day Pleadings (the “Decl.”) at *3-4.
Synagro began in 1986 as RPM Marketing, Inc. Although the company is currently headquartered in Houston, Texas, Synagro is moving its headquarters to White Marsh, Maryland. Synagro operates four divisions – facilities, services, rail and drilling. The facilities division provides waste water residuals management at fifteen different locations throughout the United States. Decl. at *4. Synagro’s services divisioin provides waste treatment services at facilities owned by individual customers. Decl. at *5. The company recently acquired a drilling division that provides waste management services to oil and gas production companies. Finally, Synagro’s rail division operates a fleet of rail cars and containers that dispose of over 500,000 tons of waste per year. Decl. at *6.
Reasons for Bankruptcy
In April of 2007, Synagro entered into a $390 million first lien credit agreement and $150 million second lien credit agreement. Decl. at *9-10. In early 2012, the company realized it was unlikely to meet its debt ratio requirements under the first and second lien agreements. Decl. at *15. According to Synagro, its high debt ratios were the result of “a challenging operating environment in late 2011 and early 2012.” Id. During the latter part of 2012, Synagro began negotiations with its lenders to see if an out of court restructuring was possible. It was during these negotiations that the company realized that a traditional sale of assets would not satisfy its obligations under the second lien agreement and that a sale under section 363 of the Bankruptcy Code was necessary. Decl. at *16.
Objectives in Bankruptcy
Synagro started the sale process in November of 2012. Over one hundred potential purchasers were contacted to generate interest in purchasing the company. Of those contacted, five provided written indications of interest. Decl. at *17. On April 23, 2013, Synagro and EQT Infrastructure II Limited Partnership (“EQT”) entered into an asset purchase agreement. The EQT purchase agreement is subject to better and higher offers and must comport with section 363 of the Bankruptcy Code. Decl. at *19. The company hopes to sell substantially all of its assets through a court-approved bankruptcy sale.
The Synagro bankruptcy is before the Honorable Brendan L. Shannon of the United States Bankruptcy Court for the District of Delaware. This case is proceeding under case no. 13-11041(BLS). Synagro is represented by the law firm Skadden, Arps, Slate, Meagher & Flom LLP.