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TerraVia auction set for September 11

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By Elaine Watson+

23-Aug-2017

TerraVia auction set for September 11

Assuming that there are suitors willing to top Corbion’s $20m stalking horse bid for the algae-fueled company, an auction for some or all of TerraVia's assets will take place on September 11 in New York at the offices of Davis Polk & Wardwell LLP.

If the auction goes ahead for the San Francisco-based firm – which filed for bankruptcy protection under Chapter 11 on August 2 - a sale hearing will be held on September 15, according to documents approved by the bankruptcy court on Tuesday.

If the auction does not proceed, the sales hearing will go ahead on September 11.

According to the asset purchase agreement filed with the court on August 2, Corbion has agreed to retain a minimum of 50 TerraVia employees (at the time of the bankruptcy filing CFO Tyler Painter said it employed "approximately 77 full- and part-time employees") and while the uncertainty has clearly dented morale at the company, some staff are understood to be cautiously optimistic about the path forward for the food and feed business, especially for Thrive culinary algal oil, which has been performing ahead of expectations.

While operations at TerraVia’s facility in Peoria, Illinois – where it has been manufacturing Thrive and its AlgaVia protein and lipid powdered ingredients – have been suspended, the facility is being “maintained in a state of readiness” such that it can be turned back on at short notice, while the company has also been building inventory to service both existing customers and projects in the pipeline, FoodNavigator-USA understands. 

Unsustainable liquidity position

TerraVia (which posted a net loss of $22.6m on revenues of $4.5m in the first quarter of 2017) had originally hoped to make a splash in the alternative energy and industrial lubricants market, but made the strategic decision to focus exclusively on food, feed and personal care, rather than biofuel/industrial products, in 2016.

According to an asset purchase agreement filed by stalking horse suitor Corbion on August 2: "The buyer [ie. Corbion] shall offer employment to no fewer than 50 employees [of TerraVia] selected by buyer in its sole discretion, with such employment to be effective on the closing date..."

According to court papers (all court documents are available HERE ), TerraVia's creditors include sales and marketing firm Acosta, oilseed and grain processor American Natural Processors, communications firm RF Binder, market data firm Nielsen, and design agency Hatch Design.

While it reduced its headcount and raised $20m last year by selling a majority stake in its Algenist skincare brand to private equity firm Tengram Capital Partners, TerraVia was not able to reach a deal with noteholders on a cash injection needed to keep the business out of bankruptcy, or negotiate a sale of some or all of the rest of the business before it became clear that it was going to run out of money, said CFO and COO Tyler Painter in a statement filed with the bankruptcy court on August 2.

 “In spite of its best efforts to create economies of scale and rapidly commercialize and profit from its product lines, TerraVia’s liquidity position has been affected by high operating costs and delays in successfully scaling up production [at a production facility developed with JV partner Bunge in Brazil].

“In addition to high operating costs and production delays, throughout 2015 and 2016, the price of petroleum and other plant-based oils experienced a persistent and protracted decline. This macro-economic trend hindered TerraVia’s near-term ability to compete with lowcost alternative products in the oils market.

“In the past year, as it became clear that its liquidity situation was unsustainable, TerraVia undertook several cost-cutting and restructuring initiatives. While these initiatives improved TerraVia’s financial position, they did not fully resolve the underlying issues that burden TerraVia’s finances.”

Products in TerraVia’s portfolio include: AlgaPrime DHA , a long chain omega-3 fatty acid targeting the animal feed market; AlgaPür , a specialty oil targeting personal care markets; culinary algae oil Thrive (a retail product): AlgaVia lipid-rich and protein-rich whole algae powders: AlgaWise high oleic algal oils : and AlgaWise algae butter (a cocoa and shea butter replacement which had been pegged for a 2018 launch).

WHAT HAPPENS NEXT?

  • August 24, 6pm EDT:  The deadline for parties to express an interest to Rothschild
  • September 7, 6pm EDT: The deadline to submit a qualified bid
  • September 11, 10am EDT: Auction in New York (if there are qualified bids) or sale hearing at the bankruptcy court in Delaware if there are not
  • September 15, 10am EDT: Sale hearing at the bankruptcy court in Delaware

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