February 28, 2024

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Plastics recycler’s Ohio subsidiary to buy out majority bondholders

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Plastics recycler's Ohio subsidiary to buy out majority bondholders

Florida-based plastics recycler PureCycle Technologies announced this week that its subsidiary, PureCycle: Ohio LLC, has agreed to buy out the majority holders of $219.55 million of outstanding private activity bonds tied to its Ironton, Ohio facility, the company’s first polypropylene purification plant. 

The tax-exempt bonds had $219.55 million in principal outstanding at the time they were issued, according to a posting on scheduling a call with bondholders at 3 p.m. EST Thursday.

PureCycle did not respond to requests for comment.

“Clearly the start-up in Ironton has not been without challenges,” CEO Dustin Olson said in a Nov. 8 earnings call.

He said that despite “numerous mechanical headaches” and limited production rates in the third quarter of 2023, “We expect to see exponential increases in production rates.” 

Under a revised bondholders agreement, PureCycle Technologies agreed to deposit $50 million of cash into a trustee account in the fourth quarter of 2023, according to the company’s third quarter investor presentation. Bondholders then gave PureCycle a 90-day cure period for each of its required milestones, with default interest accruing during the cure period.

During the November earnings call, then-Chief Financial Officer Larry Somma acknowledged that PureCycle had yet to execute the revised bondholders agreement. But he said the three-month extension of PureCycle’s required milestones was crucial. 

Somma later resigned and the firm is seeking a permanent CFO, it said in a December statement.

PureCycle’s reserves required per revenue bonds ticked up slightly in the third quarter. Its general liquidity reserve rose to $102.2 million from $101.7 million. Its capitalized interest and debt reserves climbed to $41.7 million from $41.2 million. And its other required reserves rose to $26 million from $24.7 million, a 1.3% change.

In September, PureCycle completed a convertible note offering in the corporate for $250 million. The grain convertible bonds raised $218.5 million in net proceeds. The deal was multiple times oversubscribed, Somma said, and its 7.25% coupon priced at the low end of the marketed range. 

“The proceeds replenished much-needed cash on our balance sheet that will be used to fund some of the equity requirements of our growth initiatives,” he said, noting that PureCycle also has a $150 million undrawn line of credit available.