Enviva Announces Comprehensive Agreements to Delever Balance Sheet and Strengthen Financial Position
Enviva Inc. (NYSE: EVA) announces a pre-arranged restructuring plan to reduce debt by $1.0 billion, improve profitability, and secure $500 million in financing. The company enters Chapter 11 proceedings to implement the plan, ensuring continued operations and completion of projects. Existing equity holders may receive 5% common equity post-restructuring.
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Enviva's restructuring plan aims to reduce debt by approximately $1.0 billion, improve profitability, and strengthen liquidity.
The company has secured commitments for $500 million in debtor-in-possession financing to support operations during the restructuring process.
Enviva plans to continue constructing its Epes plant, with an expected in-service date in the first half of 2025.
Existing equity holders may receive 5% of the reorganized company's common equity at exit from Chapter 11 proceedings, with warrants for an additional 5%.
Enviva anticipates the continued listing of its common stock on the NYSE throughout the restructuring process.
Enviva's announcement of a pre-arranged restructuring plan under Chapter 11 proceedings is a significant step towards addressing its financial challenges. The plan to reduce debt by approximately $1.0 billion will likely alleviate the immediate pressure on the balance sheet, potentially improving the company's debt-to-equity ratio and interest coverage metrics. This, in turn, could enhance creditworthiness and investor confidence. However, the dilution of existing equity holders to 5% of the common equity, with an additional 5% available through warrants, suggests current shareholders will experience substantial dilution. The potential long-term benefit is the improved capital structure which may position Enviva for sustainable growth in the wood-based biomass industry—a sector with increasing relevance due to global energy transition trends.
The commitment for $500 million in debtor-in-possession financing is critical, as it provides the liquidity needed to maintain operations and complete strategic projects like the Epes plant. This indicates a level of creditor confidence in Enviva's core business and restructuring plan. Investors should monitor the execution of the restructuring plan and the company's ability to meet the NYSE's continued listing standards, as failure to do so could lead to further stock volatility.
The wood-based biomass industry, where Enviva operates, is anticipated to grow due to its role in renewable energy production and as an alternative to fossil fuels. Enviva's restructuring could therefore be seen as a strategic move to capitalize on future market opportunities. The pause in the development of the Bond project reflects a strategic prioritization of resources, which may be prudent given the current financial constraints. However, it also indicates a potential slowdown in capacity expansion, which could impact Enviva's market share and competitive positioning in the long term.
Stakeholders should consider the broader implications of Enviva's financial restructuring on the industry. A successfully restructured Enviva could emerge as a more competitive player with a lower cost base and improved profitability. Conversely, delays or complications in the restructuring process could provide opportunities for competitors to capture market share. The industry's response to Enviva's restructuring, including potential mergers and acquisitions activity, will be an important trend to follow.
The voluntary Chapter 11 proceedings initiated by Enviva will involve a complex legal process, including Court approvals for the debtor-in-possession financing and the restructuring support agreements. The outcome of these proceedings will have significant implications for all stakeholders, including creditors, shareholders and employees. The legal framework provides Enviva with the opportunity to reorganize its debts and emerge from bankruptcy with a healthier financial structure, but the process is subject to uncertainties and risks.
From a legal perspective, the 'first-day' motions are standard practice in Chapter 11 cases to facilitate business continuity. If approved, they will enable Enviva to honor its commitments to suppliers and maintain operational stability. The proposed equity distribution to existing shareholders and the issuance of warrants are mechanisms to retain some value for current investors, although this is often seen as a concession in restructuring scenarios. Legal scrutiny will be concentrated on the fairness and legality of these proposals, ensuring they comply with bankruptcy laws and protect the rights of all parties involved.
03/12/2024 - 10:33 PM
-- Restructuring Plan Expected to Reduce Debt by Approximately $1.0 Billion
-- Company Commences Voluntary Chapter 11 Proceedings to Implement Pre-Arranged Restructuring Plan --
-- Company Secures Commitment for $500 Million
-- Enviva Continues Operations while Advancing its Transformation Plan --
BETHESDA, Md. --(BUSINESS WIRE)--
Enviva Inc. (NYSE: EVA) (“Enviva” or the “Company”), a leading producer of sustainably sourced wood-based biomass, today announced that it has entered into two Restructuring Support Agreements (“RSAs”): one RSA with an ad hoc group of holders (the “Ad Hoc Group”) representing approximately 72% of its senior secured credit facility, approximately 95% of its 2026 senior notes, approximately 78% of bonds related to its Epes, Alabama plant currently under construction (“Epes”), and approximately 45% of bonds related to its greenfield project near Bond, Mississippi (“Bond”), and a second RSA with certain holders representing more than 92% of bonds related to the Bond project.
The RSAs have broad support across the Company’s capital structure and are designed to support an expedited restructuring to reduce the Company’s debt by approximately $1.0 billion
To implement this pre-arranged restructuring, Enviva and certain of its subsidiaries have commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the Eastern District of Virginia (the “Court”). The Company has also secured commitments for $500 million Epes .
Glenn Nunziata, Interim Chief Executive Officer and Chief Financial Officer commented, “These agreements with our lenders and noteholders represent a significant milestone in the ongoing process to transform our business, as we focus on improving profitability, reducing costs, enhancing asset productivity, and optimizing our capital structure. We look forward to emerging from this process as a stronger company with a solid financial foundation and better positioned to be a leader in the future growth of the wood-based biomass industry. We appreciate the support of our lenders, our vendors, and our customers, and the tremendous efforts of our entire team as we continue to execute our transformation plan.”
The Company is filing with the Court several customary “first-day” motions. These motions, which Enviva expects to be approved in short order, are expected to help facilitate a smooth transition into Chapter 11. Enviva expects to continue to pay suppliers in the ordinary course for authorized goods received and services provided after the filing.
The restructuring is targeted to be completed during the fourth quarter of 2024, and throughout the process, Enviva plans to continue constructing its Epes plant, with an in-service date expected to be during the first half of 2025.
The Company also announced plans to pause development of Bond . The Company intends to revisit restarting Bond , depending on the level of customer contracting, once it emerges from its in-court restructuring process.
The terms of the RSA with the Ad Hoc Group provide for existing equity holders to receive (i) 5% of the common equity of the reorganized company at exit from Chapter 11 proceedings and (ii) warrants to purchase an additional 5% of the reorganized equity, both subject to dilution from shares issued in connection with, among other sources, a contemplated equity rights offering, equity participation election rights for creditors under the DIP Facility, and a management incentive plan, in each case, subject to Court approval.
Enviva has been in contact with the New York Stock Exchange (the “NYSE”) and anticipates the continued listing of its common stock on the NYSE throughout the restructuring process so long as the Company continues to meet the minimum continued listing standards set forth by the NYSE.
Additional information about Enviva’s restructuring process and proceedings is available at www.kccllc.net/Enviva . Stakeholders with questions may call the Company’s Claims Agent, KCC, at (888) 249-2695 or (310) 751-2601 if calling from outside the U.S. or Canada , or email envivainfo@kccllc.com .
Vinson & Elkins LLP is serving as legal counsel; Lazard is serving as investment banker; and Alvarez & Marsal is serving as financial advisor to Enviva. Davis Polk & Wardwell LLP is serving as legal advisor and Evercore Group L.L.C. is serving as financial advisor to the Ad Hoc Group.
About Enviva
Enviva Inc. (NYSE: EVA) is the world’s largest producer of industrial wood pellets, a renewable and sustainable energy source produced by aggregating a natural resource, wood fiber, and processing it into a transportable form, wood pellets. Enviva owns and operates ten plants with annual production of approximately 5.0 million metric tons in Virginia , North Carolina , South Carolina , Georgia , Florida , and Mississippi , and is constructing its 11th plant in Epes, Alabama . Enviva sells most of its wood pellets through long-term, take-or-pay off-take contracts with customers located primarily in the United Kingdom , the European Union, and Japan , helping to accelerate the energy transition away from conventional energy sources and reduce greenhouse gas emissions on a lifecycle basis in hard-to-abate sectors like steel, cement, lime, chemicals, and aviation. Enviva exports its wood pellets to global markets through its deep-water marine terminals at the Port of Chesapeake, Virginia , the Port of Wilmington, North Carolina , and the Port of Pascagoula, Mississippi , and from third-party deep-water marine terminals in Savannah, Georgia , Mobile, Alabama , and Panama City, Florida .
To learn more about Enviva, please visit our website at www.envivabiomass.com . Follow Enviva on social media @Enviva.
Cautionary Note Concerning Forward Looking Statements
The information included herein and in any oral statements made in connection herewith include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included herein are forward-looking statements. When used herein, including any oral statements made in connection herewith, the words “could,” “should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” the negative of such terms, and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Enviva disclaims any duty to revise or update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date hereof. Enviva cautions you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Enviva. These risks include, but are not limited to, risks and uncertainties regarding: our ability to successfully complete a restructuring under Chapter 11; potential adverse effects of the Chapter 11 proceedings on our liquidity and results of operations (including the availability of operating capital during the pendency of Chapter 11 proceedings); our ability to obtain timely approval by the Court with respect to the motions filed in the Chapter 11 proceedings; objections to our restructuring process, debtor-in-possession financing, or other pleadings filed that could protract the Chapter 11 proceedings; employee attrition and our ability to retain senior management and other key personnel due to distractions and uncertainties associated with the Chapter 11 proceedings, including our ability to provide adequate compensation and benefits during the Chapter 11 cases; our ability to maintain relationships with vendors, customers, employees, and other third parties and regulatory authorities as a result of the Chapter 11 proceedings; the debtor-in-possession financing and other financing arrangements; the effects of the bankruptcy petitions on the Company and on the interests of various constituents, including our stockholders; the length of time that we will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the proceedings; risks associated with third party motions in the Chapter 11 proceedings, which may interfere with our ability to consummate a restructuring; our consummation of a restructuring; increased administrative and legal costs related to the Chapter 11 process and other litigation and inherent risks involved in a bankruptcy process; the Company’s ability to continue funding operations through the Chapter 11 bankruptcy process; our ability to continue as a going concern; our ability to successfully execute cost-reduction and productivity initiatives on the anticipated timeline or at all; the outcome and timing of our comprehensive review; the volume and quality of products that we are able to produce or source and sell, which could be adversely affected by, among other things, operating or technical difficulties at our wood pellet production plants or deep-water marine terminals; the prices at which we are able to sell our products, including changes in spot prices; our ability to capitalize on higher spot prices and contract flexibility in the future, which is subject to fluctuations in pricing and demand; impairment of goodwill, intangible assets, and other long-lived assets; failure of our customers, vendors, and shipping partners to pay or perform their contractual obligations to us; our inability to successfully execute our project development, capacity expansion, and new facility construction activities on time and within budget; the creditworthiness of our contract counterparties; the amount of low-cost wood fiber that we are able to procure and process, which could be adversely affected by, among other things, disruptions in supply or operating or financial difficulties suffered by our suppliers; changes in the price and availability of natural gas, coal, diesel, oil, gasoline, or other sources of energy; changes in prevailing domestic and global economic, political, and market conditions, including the imposition of tariffs or trade or other economic sanctions, political instability or armed conflict, rising inflation levels and government efforts to reduce inflation, or a prolonged recession; inclement or hazardous environmental conditions, including extreme precipitation, temperatures, and flooding; fires, explosions, or other accidents; changes in domestic and foreign laws and regulations (or the interpretation thereof) related to renewable or low-carbon energy, the forestry products industry, the international shipping industry, or power, heat, or combined heat and power generators; changes in domestic and foreign tax laws and regulations affecting the taxation of our business and investors; changes in the regulatory treatment of biomass in core and emerging markets; our inability to acquire or maintain necessary permits or rights for our production, transportation, or terminaling operations; changes in the price and availability of transportation; changes in foreign currency exchange or interest rates and the failure of our hedging arrangements to effectively reduce our exposure to related risks; risks related to our indebtedness, including the levels and maturity date of such indebtedness; our failure to maintain effective quality control systems at our wood pellet production plants and deep-water marine terminals, which could lead to the rejection of our products by our customers; changes in the quality specifications for our products required by our customers; labor disputes, unionization, or similar collective actions; our inability to hire, train, or retain qualified personnel to manage and operate our business; the possibility of cyber and malware attacks; our inability to borrow funds and access capital markets; viral contagions or pandemic diseases; potential liability resulting from pending or future litigation, investigations, or claims; changes to our leadership and management team; and governmental actions and actions by other third parties that are beyond our control. Certain additional risks, uncertainties, and other factors are described in greater detail in Enviva’s filings with the SEC, including the detailed factors discussed under the heading “Risk Factors” in Enviva’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as supplemented in the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, June 30, and September 30, 2023.
Should one or more of the risks or uncertainties described herein and in any oral statements made in connection therewith occur, or should underlying assumptions prove incorrect, actual results and plans could different materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact Enviva’s expectations and projections can be found in Enviva’s periodic filings with the SEC. Enviva’s SEC filings are available publicly on the SEC’s website at www.sec.gov .
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Source: Enviva Inc.
Enviva Inc.'s ticker symbol is EVA.
Enviva's restructuring plan aims to reduce debt by approximately $1.0 billion, improve profitability, strengthen liquidity, and position the business for long-term success.
Enviva has secured commitments for $500 million in debtor-in-possession financing to support operations during the restructuring process.
Enviva's Epes plant is expected to be in service during the first half of 2025.
Existing equity holders may receive 5% of the common equity of the reorganized company at exit from Chapter 11 proceedings, with warrants for an additional 5%.
