A federal bankruptcy judge approved the sale of Indianapolis-based chemical company Vertellus Specialties Inc. on Thursday after the U.S. Environmental Protection Agency withdrew its objection to the sale.
Vertellus filed for Chapter 11 bankruptcy protection on May 31. As part of that process, the company reached an agreement with its lenders for them to buy the company for $454 million. The offer was in the form of a credit bid, in which the lenders offered to cancel Vertellus’ debt.
The lenders group, also referred to as the stalking horse purchaser, calls itself Valencia Bidco LLC.
Last week, the EPA and state environmental agencies in Indiana, Ohio and Utah filed an objection to the proposed sale, saying that it did not adequately address the environmental cleanup needs at Vertellus-owned sites in Indianapolis and elsewhere.
In its objection, the EPA said Vertellus’ “wind-down budget” included only $450,000 for environmental compliance—far short of the estimated $137 million required for cleanup at the sites over the next 100 years.
The properties at issue include two Indianapolis locations: a 120-acre site at 1500 S. Tibbs Ave. that is classified as Superfund site because of soil and groundwater contamination; and a 4- to 5-acre site at 737 Miley Avenue near the White River. Other sites named in court documents are in Provo, Utah; Cleveland and Dover, Ohio; St. Louis Park, Minnesota; and Fairmont, West Virginia.
In its objection, the EPA said some of the six named sites were excluded from the proposed sale agreement, and that the pact included “sweeping language” relieving the purchaser of “any and all liability for practically all of [the] debtors’ past actions, including all environmental liabilities.”
In response, Vertellus said in a legal filing that it believed the money it had set aside for environmental cleanup was “reasonable and appropriate” based on historical expenditures at the sites in question. The company also said that, if that amount proved insufficient, “there is approximately $19.4 million of financial assistance in the form of letters of credit and a funded trust that is available to the EPA and state agencies.”
During a hearing in U.S. Bankruptcy Court in Delaware on Wednesday afternoon, attorneys for both Vertellus and the EPA told Judge Christopher Sontchi they had come up with a revised sales agreement that addressed the EPA’s objections.
That revised agreement was filed with the court Thursday morning, shortly after which Sontchi approved it.
Under the new agreement, Valencia Bidco will not sign the existing consent decree that outlines environmental obligations at the Tibbs Avenue Superfund site. Instead, “the EPA shall continue in good faith to consider approving air sparging as an alternative remedy and entering into a new agreement with the purchaser that will replace the existing consent decrees,” the revised agreement says.
Air sparging involves pumping air underground to help remove contaminated vapors from groundwater and the soil beneath it.
The revised agreement also says that Valencia Bidco will comply with the existing Tibbs Avenue consent decree, “including maintaining financial assurance,” while the new agreement is being worked out.
Another revision to the agreement removes language that had said the wind-down budget was to be the exclusive source of funding for Vertellus’ work at the properties excluded from the sale.
Vertellus produces specialty chemicals for a variety of uses, including agriculture, nutritional, pharmaceutical, medical and personal care.
Vertellus’ largest facility is its South Tibbs Avenue plant, which employs about 240 workers. The company also has operations elsewhere in the United States as well as Europe and Asia.
The company has cited slowing demand for two of its products—pyridine and picoline—and an increase in production from Chinese competitors as reasons for its financial troubles.
Pyridine is used in herbicides, insecticides, vitamin B3 and even Head & Shoulders shampoo. Picoline is used in agricultural chemicals.