A creditor of Cereplast Inc. is asking an Indiana bankruptcy judge to liquidate the company.
The creditor, Horizon Technology Finance Corp., filed a motion on Feb. 14 requesting that Cereplast's case be converted, saying it was only filed to thwart a Feb. 11 asset sale.
The Seymour, Ind.-based company manufactures bio-based, compostable and sustainable plastics that are used for injection molding, thermoforming, blow molding and extrusions.
Court documents did not specify when Judge Basil Lorch III of the U.S. Bankruptcy Court for the Southern District of Indiana in New Albany would preside over a hearing.
Cereplast, according to court documents, owes Horizon about $2.8 million on a loan from 2010, which it defaulted on. The loan was secured by Cereplast's collateral.
When the debtor defaulted on the loan, Horizon notified it that it would sell its collateral, which includes Cereplast's goods, inventory, contracts and other assets. A sale was scheduled for Feb. 11. Cereplast tried to fight the sale, according to court documents, but on Feb. 10 the company's request to stop the sale was denied by the Superior Court of the State of California.
Cereplast Inc., which Mergers & Acquisitions had identified as a distressed company in November, filed for Chapter 11 bankruptcy protection on February 10. The company listed assets and liabilities between $10 million and $50 million on its petition.
Through its bankruptcy process, Cereplast expects to strengthen its balance sheet, clean up its capitalization structure and gain financial flexibility, the company said in a statement.
"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," says Cereplast CEO Frederic Scheer in the statement.
Cereplast is working on negotiating debtor-in-possession financing, which would be used to support the business during its bankruptcy case.
In Horizon's conversion motion, the creditor says Cereplast has no discernible source of operating capital, and that it will not provide additional funding. The creditor also filed a motion for relief from stay on Feb. 18.
Tamara Marie Leethan of Austin Legal Group is debtor counsel.
Thomas Scherer and Whitney Mosby of Bingham Greenebaum Doll LLP are counsel to Horizon.