Prairie Catalytic, LLC
Prairie Catalytic, LLC, located in Columbus, NE, was a producer of renewable ethyl acetate, a widely used, low toxicity specialty solvent used in a variety of industrial and consumer product applications. Through fiscal year ended December 31, 2019, the company operated in the investment and commissioning phase, and over $66 million of capital had been invested. During the commissioning phase of the facility, the company identified certain issues that constrained capacity below original design specifications. These problems led to significant cost overruns and delays in the construction and commissioning of the facility. It was estimated that an additional investment of $15 million would be needed to get the facility at 100% and the owners, largely made up of individuals, ultimately decided to abandon the project. On December 15, 2019, Alliance Management was appointed as receiver.
Alliance developed a plan to market and sell the assets of the company on a turn-key basis under which it would be restarted and operated as a going concern. It was determined that the company’s assets would have to be marketed with an understanding that a buyer would need to make an additional investment in order for the facility to successfully operate.
Alliance marketed the opportunity (during the COVID pandemic) and two parties emerged as the most likely buyers and Alliance negotiated with both in an effort to create competition and maximize value. A chemical company, funded by a private equity company and a management sponsor, was deemed the higher offeror and a purchase agreement was entered into by the parties, approved by the court and the transaction was closed in February 2021.
Despite the plant design flaws, limitations on capacity, and no consistent revenue history, Alliance was able to execute a $12-$17 million sale of the assets during a global pandemic that resulted in $8 million in cash at closing, $4 million of seller financing and the potential for up to $5 million of earnout royalty payments. This consideration significantly exceeded the appraised liquidation value of the assets.
