Searles Valley Minerals - Chapter 11 Case Summary

Business Description

Headquartered in Overland Park, Kansas, Searles Valley Minerals Inc. ("SVM"), together with its debtor subsidiaries (the "Debtors") and a non-Debtor subsidiary (collectively, "Searles Valley" or the "Company"), operates a vertically integrated mining and processing complex at Searles Lake in Trona, California, where it employs approximately 280 people.

• The Company produces critical industrial minerals—including borates, sodium sulfate, and salt, and until recently soda ash—sourced from one of the largest known deposits of water-soluble borates in North America. It ranks among the largest and lowest-cost producers of borates.
• Searles Lake is a globally rare resource: one of only four known reserves of water-soluble borates in the world and one of only five natural soda ash mining locations in the United States.

The Company serves a diversified customer base across industrial, agricultural, and specialty chemical end markets. Its nationwide footprint is concentrated in Southern California and Baja, Mexico, supplying minerals essential to a wide range of everyday products—from glassware used in the beverage industry and pharmaceutical labs to household laundry detergents.

• In February 2026, the Company mothballed its soda ash mining facilities at Searles Lake to focus production on higher-margin borates, though it continues to source and supply soda ash to end users.

The Company operates through three Debtor entities:

• SVM: the core mining and mineral-processing business.
• Searles Domestic Water Company LLC ("SDWC"): operates a water treatment facility and provides potable water to the residents of Trona, California.
• Trona Railway Company LLC ("TRC"): owns and operates a private short-line railway (the "TRC Railway") that runs from the Company's facilities to an interconnect with the Union Pacific main line, providing key logistics for the delivery of products to customers.

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Corporate History

The Company's mining operations at Searles Lake have a long history, dating back more than 150 years. The lake itself ranks among the world's most significant mineral deposits—the second largest deposit of boron in the world, one of only four known water-soluble sodium borate (tincal) deposits globally, and one of only five natural soda ash mining locations in the United States.

• Searles Lake was first discovered in 1862 by John Searles while he was searching for gold. He and his brother, Dennis, went on to found the San Bernardino Borax Mining Company at Searles Lake and commenced borax mining operations.

Acquisition by Nirma

The mining business changed hands a number of times over the following decades. Most recently, in 2007, Searles Valley Minerals Operations Inc.—SVM's predecessor—was acquired by its current sponsor, Nirma Limited ("Nirma"), a manufacturer of industrial and consumer products (including detergents, soaps, and salts) headquartered in Ahmedabad, Gujarat, India.

Relationship with Nirma and Navin

Nirma and its affiliate, Navin Overseas FZC ("Navin"), are also customers of SVM:

• The two purchased an aggregate of approximately $9.8 million, $9.2 million, and $6.2 million of V-BOR in calendar years 2023, 2024, and 2025, respectively, and historically purchased soda ash as well, with aggregate annual sales of less than $1 million in each of 2024 and 2025.
• SVM's sales of V-BOR to Nirma and Navin are generally on customary trade terms, consistent with those provided to other customers based on market, region, and customer size. Several years ago, however, Nirma and Navin began prepaying SVM for V-BOR to help mitigate the Company's liquidity challenges.
• As of the Petition Date, no trade payables were owed to SVM by Nirma and Navin, and SVM's books and records reflect outstanding prepayment credits on their behalf.

Corporate Structure

• SVM is the direct parent of TRC and SDWC; SVM, TRC, and SDWC are each incorporated in Delaware. SVM also directly holds 100% of the common stock of non-Debtor Searles Valley Minerals Europe ("SVM Europe"), a French entity that historically served as an international sales outpost.
• SVM is privately held and wholly owned by Karnavati Holdings, Inc. ("KHI"), a Delaware corporation, which in turn is wholly owned by Nirma.

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Operations Overview

The Company extracts minerals from the dry lakebed at Searles Lake using Warm Solution Mining ("WSM"), an environmentally friendly solution mining process used in place of traditional open-pit mining.

• Under the WSM process, hot brine is injected into the subsurface salt deposit layers through injection wells to dissolve minerals, and the resulting mineral-rich brine is pumped back to the surface through production wells.
• The Company develops "borax roads," each containing five production wells and 30 injection wells (six injection wells per production well). The wells tap the Upper Salt Brine layer—30 to 70 feet beneath the lake surface—where most of the borax is located.

Processing Facilities

The Company has historically operated three processing plants at Searles Lake. Activity at the Argus and Trona facilities is currently mothballed, while mining and processing operations continue at Westend.

• Westend: Extracts unrefined Primary Borax from both fresh lake brine and carbonated brine from the Argus SAC plant. Primary and secondary recovery borax is dissolved and recrystallized, converting it from borax decahydrate to the pentahydrate form ("V-BOR").
  • The plant historically achieved high Primary Borax and V-BOR production rates, but Primary Borax production was impacted by the Ridgecrest Earthquakes in 2019, which lowered brine grade and weighed on profitability.
• Argus: Historically produced soda ash by carbonating lake brine with CO2 to form sodium bicarbonate, which was then crystallized and converted back to sodium carbonate (dense soda ash). The plant also houses a Soda Ash Consolidation ("SAC") unit that carbonates brine fed to the Westend facility.
  • Soda ash production declined beginning in 2021 due to a combination of technical and commercial challenges, and in February 2026 the Company shut down soda ash operations to preserve liquidity.
• Trona: Produces boric acid ("BAX") by reacting the Primary Borax produced at Westend with sulfuric acid. BAX was historically produced using borax extracted via the liquid-liquid extraction ("LLX") unit, but in 2024 the Company mothballed the LLX plant due to high chemicals and utilities costs that resulted in poor production economics.

Railway and Logistics

The Company's facilities are well-connected for distribution across North America through TRC's private short-line railway, which runs from the facilities to an interconnect with the Union Pacific main line.

• The TRC Railway has the capacity to transport the entire output from the Company's production facilities—approximately 1.8 million tons per year—using a fleet of roughly 1,600 leased railcars.
• The Company historically maintained port facilities at Long Beach and San Diego with dedicated storage and distribution capability, connecting to the San Diego Port via the TRC Railway and Union Pacific main line, and to the Long Beach Port via a transloader into the BNSF Railroad.
• In February 2026, contemporaneously with the mothballing of its soda ash facilities and related layoffs, the Company halted its use of the San Diego Port.

BLM Leases

The U.S. government owns a large portion of the land the Company uses to source and process finished goods, which the Company leases through the U.S. Department of the Interior's Bureau of Land Management (the "BLM"). Under the lease agreement, the Company pays a royalty fee based on the value of production removed from the land, calculated as a percentage of net sales.

Water Sourcing and Supply

SVM maintains five water wells and two 30-mile pipelines used to source water in the Searles Lake area.

• SVM uses approximately 90% of the water it sources in its own mining operations and sells the remaining 10% to SDWC.
• SDWC is a water utility regulated by the California Public Utilities Commission. It distributes the water obtained from SVM to provide clean, safe drinking water to approximately 760 residential and commercial customers along the west shoreline of Searles Lake, including the town of Trona, California.
• SVM is a party to pending state court litigation in the Superior Court of the State of California to determine rights to water in the Indian Wells Valley Basin, which is SVM's sole source of water.

Employees

As of the Petition Date, the Debtors employed approximately 279 full-time employees and one part-time employee, all located in the United States.

• Approximately four of the Debtors' employees are represented by the International Association of Sheet Metal, Air, Rail and Transportation Workers Transportation Division GO-887 (the "Union").
• All Union-represented employees are employed by Debtor TRC, whose relationship with the Union is reflected in a collective bargaining agreement.

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Prepetition Obligations

As of the Petition Date, the Debtors report approximately $85.5 million in funded secured indebtedness, owed entirely to a single prepetition lender across two facilities. Beyond this secured debt, the Company carries substantial unsecured obligations, including shareholder loans, an environmental compliance shortfall, and general trade claims. The Company’s prepetition capital structure is summarized below:

Secured Debt

• SVM is the borrower under two secured credit facilities with HSBC Bank USA, National Association (the “Prepetition Secured Lender”), which together account for approximately $85.5 million of outstanding funded secured indebtedness.
• Demand Line Facility: SVM maintains a demand line of credit with HSBC under a facility letter dated August 29, 2025, providing for up to $59.5 million for working capital purposes, with a sublimit for performance and/or financial standby letters of credit (the “LOC Sublimit”).
  • Borrowings accrue interest at either 8% for prime term loans or SOFR plus 2.25% for floating term loans.
  • The facility is secured by a first-priority lien on all of SVM’s personal property and is guaranteed by Nirma. It is subject to annual renewal by HSBC, in its sole discretion, each April 30.
  • As of the Petition Date, approximately $47.4 million in principal is outstanding on account of general working capital loans, with an additional $12.1 million in letters of credit issued under the LOC Sublimit.
• Receivables Facility: SVM also maintains a recourse receivables purchase facility with HSBC under a Recourse Receivables Purchase Agreement dated March 29, 2024, through which HSBC advances funds by purchasing substantially all of SVM’s eligible trade receivables, with SVM repaying the advances as the underlying receivables are collected.
  • Advances accrue interest at a variable rate of SOFR plus 2.25%.
  • The facility is secured by a lien on substantially all of SVM’s personal property, ranking pari passu with the lien under the Demand Line Facility. In connection with the Debtors’ agreement for the consensual use of cash collateral, Nirma has provided a guarantee of up to $30 million of SVM’s obligations.
  • The facility renews automatically for successive one-year periods, subject to termination by either party on 30 days’ notice.
  • As of the Petition Date, approximately $26 million is outstanding. The Prepetition Secured Lender has agreed to allow continued access to the facility to provide the Debtors critical liquidity during these Chapter 11 Cases, as detailed in the Debtors’ DIP Motion.

Unsecured Parent Loans

• SVM received a series of unsecured loans from its sole shareholder, KHI, between 2019 and 2026 (the “Initial Parent Loans”).
  • On January 12, 2026, SVM, as borrower, and KHI, as lender, entered into the 2026 Term Loan Agreement, providing an additional $10 million term loan at an interest rate of SOFR plus 2.25%.
  • As of the Petition Date, approximately $135.2 million is outstanding under the Unsecured Parent Loans.

Environmental Obligations

• The Company is a Covered Entity under California’s Cap-and-Reinvest Program, which caps greenhouse gas emissions and requires Covered Entities to surrender allowances equal to their emissions—30% annually and the remaining 70% at the end of each three-year compliance period. Allowances may be acquired at state-administered auctions or in private transactions, and certain industries receive a portion without charge.
  • Each year, the Company measures its carbon emissions, which are verified by a third-party representative of the State of California, and receives free allowances based on its average production in prior years. The shortfall between total emissions and allowances represents its annual financial obligation, which the Company has historically satisfied by purchasing credits on the market.
  • Based on recent market prices for allowances, the Company estimates a net financial obligation of approximately $76.3 million in connection with the program as of the Petition Date.

Other Unsecured Obligations

• In the ordinary course of business, the Debtors incur trade and other general unsecured debt on varying terms. As of the Petition Date, the Debtors estimate approximately $47.2 million in general unsecured claims, excluding any rejection damages claims.

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Events Leading to Bankruptcy

Overview of Financial Decline

• The Company had long operated as a consistently profitable enterprise, generating EBITDA of $56 million, $46 million, and $52 million in fiscal years 2017, 2018, and 2019, respectively. That trajectory reversed sharply following a series of operational and market shocks:
  • The July 2019 Ridgecrest earthquakes inflicted significant damage on the Company's Mojave Desert complex, resulting in approximately $50 million in repairs and lost revenue.
  • Persistent headwinds in the soda ash market—most notably oversupply from lower-cost producers of synthetic soda ash in China—combined with the need for additional capital to improve operations, frustrated the Company's efforts to return to profitability.
  • Earnings deteriorated dramatically beginning in fiscal year 2020, culminating in losses of $18 million, $24 million, $27 million, and $71 million in fiscal years 2023, 2024, 2025, and 2026, respectively.
• Despite these challenges, the business continues to generate sales to a committed, long-term customer base, underscoring the resilience of its commercial platform and customer relationships.

Impact of the Ridgecrest Earthquakes

• On July 4 and 5, 2019, two consecutive earthquakes struck to the north and northeast of Ridgecrest, California—approximately 25 miles from SVM's facilities at Searles Lake—causing significant above-ground and subsurface damage to operations and to the lake itself.
  • The damage to the Company's extraction operations has yet to be fully restored and remains at roughly 50 percent of pre-earthquake production levels.
  • SVM incurred approximately $50 million in direct losses from repairs and lost revenue during the recovery period, driving EBITDA down from approximately $52 million in fiscal year 2019 to just $2 million in fiscal year 2020.
  • The facilities were offline for roughly two months in 2019. With no heat added to the lake during that period, cooling reduced the brine concentration level, in turn reducing production and revenue.

Challenging Market Conditions for Soda Ash

• The global soda ash market entered a period of significant volatility that pressured pricing and margins across the industry. These headwinds were driven by worldwide oversupply—particularly synthetic soda ash production from China—sluggish downstream demand in key sectors such as construction and glassmaking, and rising production costs attributable largely to heightened environmental regulation.
• As a result, the Company's soda ash operations began running at a significant loss, with net sales of soda ash falling from approximately $223 million in fiscal year 2023 to approximately $147 million in fiscal year 2026.

Prepetition Strategic Alternatives and Sale Process

• To confront the shifting soda ash market and the lingering effects of the Ridgecrest earthquakes, the Company explored a range of strategic alternatives, including a transformation plan to pivot from soda ash toward increased borate production and potentially other, more profitable markets. Implementation, however, would have required substantial capital expenditures at a time of mounting liquidity shortfall.
• The Company turned to a formal marketing process:
  • In February 2024, SVM and its immediate parent, non-Debtor KHI, engaged Lazard as investment banker to evaluate and market the Debtors' assets for a potential sale.
  • In August 2025, the Debtors commenced the SVM Sale Process, through which Lazard contacted over 140 parties, with 50 parties executing NDAs and accessing confidential diligence.
  • By April 2026, it became clear that an out-of-court transaction was not viable—due in part to the Debtors' legacy liabilities that would transfer with the business and buyers' unwillingness to acquire the business outside a court-supervised process. Lazard accordingly shifted discussions with several buyers toward an in-court sale.
• By early 2026, the Company was operating at a monthly loss exceeding $5 million, with projected liquidity rapidly diminishing through the balance of 2025 and into 2026. To preserve value, the Company made the difficult decision to mothball soda ash production in February 2026, implementing a corresponding reduction in force that laid off 240 employees and independent contractors—approximately 46 percent of its prior workforce.
• In April 2026, the Company pivoted to a potential in-court transaction, including a section 363 sale, and—working with Lazard and its other advisors—reconnected with several potential buyers. Those discussions remain ongoing.

Corporate Governance Enhancements

• Ahead of filing, the Company instituted independent governance mechanisms:
  • On May 26, 2026, SVM appointed John S. Dubel as a new Independent Director, delegating to him—together with any other disinterested Board members—authority to review, negotiate, and approve related-party transactions involving its shareholder and sponsor, KHI and Nirma, as well as to review historical affiliate transactions and approve any restructuring transaction.
  • On June 12, 2026, the Board formed an Independent Committee comprised solely of the Independent Director, vested with exclusive authority over transactions between KHI and the Debtors, including the terms of the DIP Facility provided by KHI.

Liquidity and Financing Arrangements

• Upon electing to pursue a section 363 sale, the Company—with Lazard and Ankura—analyzed its liquidity needs and canvassed the market for funding, with Lazard contacting 37 parties to gauge financing interest while Nirma and the advisors engaged soda ash suppliers to capture liquidity from the Company's soda ash contracts.
• Supply and Liquidity Agreement. On June 14, 2026, the Company entered into a Soda Ash Supply Agreement and Liquidity Arrangement with TATA Chemicals North America Inc. ("TATA").
  • TATA agreed to provide $20 million in unsecured, interest-free liquidity advances and to fulfill the Company's soda ash requirements to its end users, in exchange for payments on soda ash receipts at an agreed price per metric ton and superpriority administrative expense claims.
  • The Debtors' obligations are guaranteed by Nirma, which in turn will receive non-priming postpetition liens and superpriority administrative expense claims (subject to Court approval) for its contingent reimbursement claims. The arrangement provides $7 million of postpetition funding on an interim basis, with the remaining $13 million available upon final approval.
• DIP Facility and Cash Collateral. To supplement its funding for a potential section 363 sale, the Company secured a $20 million junior DIP financing facility from KHI, with $7 million available on an interim basis and $13 million upon final approval.
  • The DIP Lender will receive a junior lien on all assets subject to the Prepetition Secured Lender's liens and a first-priority lien on all unencumbered assets (e.g., real property).
  • Following negotiations, the Prepetition Secured Lender consented to the consensual use of cash collateral and continued access to the Receivables Facility—up to $30 million of funding during the cases—in exchange for additional liens on unencumbered Petition Date collateral and superpriority administrative expense claims.

Path Forward

• Although the Supply and Liquidity Agreement, the DIP Facility, and consensual use of cash collateral provide immediate stabilization, the Company's liquidity runway is finite, making time of the essence. Having already run a comprehensive marketing process and identified potential buyers, the Company intends to move deliberately and quickly toward a value-maximizing, court-approved transaction using the tools of chapter 11 previously unavailable to it.
• While the Company would have preferred to file with a stalking horse bidder in place, it commenced these cases upon securing financing and cash collateral commitments and will continue pursuing a stalking horse, seeking approval of bidding procedures that permit customary, market bid protections. The proposed timeline targets a Bid Deadline of August 6, 2026, an auction on August 13, 2026, a sale hearing on August 20, 2026, a sale closing on September 10, 2026, and an Effective Date of October 19, 2026.