Viridis Chemical - Chapter 11 Case Summary

Business Description

Headquartered in Kingwood, TX, Viridis Chemical, LLC ("Viridis Chemical"), along with its Debtor affiliates (collectively, "Viridis" or the "Company"), is a privately held developer of bio-based, low-carbon chemical technology for the production of ethyl acetate.

• As one of only three ethyl acetate plants in the United States, Viridis has developed a proprietary "Prairie Green™ catalytic process" to produce ethyl acetate using only 100% corn-based ethanol instead of hydrocarbon feedstocks.
• Through this process, the main byproducts are water and hydrogen gas, which are reused as heating fuel in the plant, further reducing hydrocarbon consumption compared to other ethyl acetate producers.
• The Prairie Green™ process results in approximately 80% lower emissions, fewer downstream concerns, and a lower carbon footprint compared to conventional ethyl acetate production.

Ethyl acetate is a versatile, low-toxicity solvent widely used across the modern manufacturing industry. It is used in everything from paints, coatings, and packaging to household goods, pharmaceuticals, and personal care products like nail polish.

• Nearly 30 years ago, industry participants began moving away from hydrocarbon-based solvents, and ethyl acetate became the leading replacement.
• The Company's target customers are already consumers of ethyl acetate: companies in the coatings, packaging, and consumer products industries.

The Company has only two North American competitors and competes with a limited group of foreign companies that provide imported ethyl acetate to the North American market. The Viridis plant is expected to reduce that volume of imports and provide supplier diversity to customers currently relying on the two North American incumbents.

• At full capacity, the plant is expected to produce roughly 100 million pounds of ethyl acetate per year.
• The plant is designed to run continuously.

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Corporate History

Founded in 2021, Viridis was originally established by its private equity sponsors, an affiliate of EIV Capital ("EIV") and a minority investor (the "Minority Investor"), for the purpose of acquiring the plant assets and intellectual property of Prairie Catalytic, LLC ("Prairie Catalytic"), a subsidiary of Greenyug, LLC, which had developed the original patent for renewable ethyl acetate.

• Prairie Catalytic completed construction of a chemical manufacturing plant in Columbus, Nebraska (the "Nebraska Plant") in 2019, adjacent to an Archer Daniels Midland ("ADM") ethanol plant, but was unable to bring the plant to commercial operation because it was later determined that the ADM plant could not make an ethanol supply that was pure enough for the Nebraska Plant's needs.
• Viridis purchased the assets of Prairie Catalytic out of a receivership in 2021 for $8 million in cash and a $4 million Subordinated Unsecured Note, with the goal of reviving and improving the plant's operations.

Initial Operations and Proof of Concept

Following the acquisition of Prairie Catalytic's assets, the Company was able to bring the Nebraska Plant to limited operations despite the inability to use ethanol from the neighboring ADM facility by sourcing railcar supply of corn-based, pharmaceutical grade ethanol from an ethanol plant owned by BioUrja Renewables, LLC ("BioUrja") located in Peoria, Illinois.

• This demonstrated to investors that the Nebraska Plant could operate and produce a commercially viable product.
• During that period, the Company's renewable ethyl acetate was quality tested and approved for purchase by nearly 40 customers in the United States and Europe.

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Operations Overview

However, the Nebraska Plant experienced persistent operational challenges and could not achieve sustainable, cost-competitive operations without access to lower cost or on-site purified ethanol, which was not available at the Nebraska location.

• An expensive construction project would have been required to purify the ethanol feed at the Nebraska Plant and, even if completed, the Nebraska Plant would still not have been cost-effective due to unfavorable utility, shipping, and selling costs associated with the Nebraska location.

Strategic Relocation to Peoria, Illinois

In light of these challenges, the Company made the strategic decision to relocate the plant from Columbus, Nebraska to Peoria, Illinois, announcing the move in November 2024.

• The relocation was initiated to improve the cost of utilities, wastes, product shipping and storage, as well as additional product storage and other plant improvements that were made to help ensure that the plant can achieve its full production volume in the future, with a projected margin expansion exceeding 20%, and to position the Company closer to its expected core customer base.
• The core of the strategy change was a set of long-term agreements between BioUrja and Viridis to re-locate the plant to available land on their large Peoria site, including a long-term ethanol supply agreement, services including utilities and waste water treatment, and assistance with loading and shipping products.
• In Peoria, the Company also leases land from BioUrja and the plant will be strategically co-located with BioUrja's high-purity, corn-based ethanol plant, which will enable more efficient and sustainable production of the Company's renewable ethyl acetate.
• This location and these contracts also enable Viridis to reduce upfront investment costs by contracting with BioUrja for services such as shipping, cooling water, and waste-water treatment.
• The Peoria site offers access to major rail lines and barge-navigable routes connecting to the US Inland Waterways (Illinois, Mississippi Rivers and Great Lakes), giving Viridis close proximity to core ethyl acetate customers in the Midwest and Northeast, and the ability to ship by water to Europe and other world markets in the future.

To effectuate the move of the plant from Nebraska to Peoria, Viridis entered into a master services agreement with Sterling Global Industries, LLC ("Sterling" and such agreement, the "Sterling Contract") in January 2025 to act as general contractor on the project.

• Disassembly of the Nebraska Plant began in January 2025, and the majority of the plant components and equipment were on site in Peoria by summer 2025.
• Notably, work on the reconstruction of the plant in Peoria has been paused, and the Company therefore currently has no business operations and is generating no revenue.

Management and Workforce

The Company is led by an experienced management team comprised of Patrick Killian, Chief Executive Officer, with 31 years of industry experience, and Mark Barta, Chief Financial Officer, with 14 years of industry experience.

• As of the Petition Date, the Debtors employ ten individuals on a full-time or part-time basis.
• The Company's management team is supported by employees who are vital to the completion of the plant, the Company's future business operations, and these Chapter 11 Cases.

Organizational Structure

The Company's organizational structure consists of five entities. All of the Company entities are Debtors in these Chapter 11 Cases.

• The Company's operations are conducted through Viridis Chemical, LLC ("Viridis Chemical"), a Delaware limited liability company with its principal place of business in Kingwood, Texas, which serves as the primary operating entity.
  • Viridis Chemical holds the company's main operating and money market bank accounts, is the issuer of the Company's Secured Notes and Subordinated Unsecured Notes, and holds the Company's intellectual property.
• Viridis Chemical directly holds 100% of the equity in each of Viridis Chemical Payroll Holdings, LLC ("Viridis Payroll Holdings"), a Delaware limited liability company, Viridis Chemical NE Asset Co 1, LLC ("Viridis Asset Co 1"), a Delaware limited liability company, and Viridis Chemical NE Asset Co 2, LLC ("Viridis Asset Co 2"), a Delaware limited liability company.
• Viridis Chemical directly holds 99% of the equity of Viridis Chemical Payroll, LLC ("Viridis Payroll").
• Viridis Payroll Holdings is a holding company and has no material investments or ownership interests other than its direct ownership of 1% of the equity interests of Viridis Payroll.
• Viridis Payroll and the Debtors' co-employer, Insperity PEO Services, L.P., employ the Company's employees.
• Viridis Asset Co 1 is a guarantor under the Secured Notes and holds assets related to the former Nebraska Plant, including the real property on which it previously sat and certain equipment stored in Nebraska.
• Viridis Asset Co 2 is a guarantor under the Secured Notes and has no material investments or ownership interests.

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Prepetition Obligations

As of the Petition Date, the Debtors' funded debt liabilities total approximately $17.3 million, including approximately $13.5 million in outstanding principal and $3.8 million in accrued and unpaid interest. The Company's prepetition capital structure includes the following obligations:

Secured Notes

• Approximately $10.0 million is outstanding under the senior secured convertible promissory notes (the "Secured Notes"), issued pursuant to the Note Purchase Agreement dated as of August 8, 2023, by and among Viridis, as issuer, Viridis Chemical NE Asset Co 1, LLC and Viridis Chemical NE Asset Co 2, LLC, as subsidiary guarantors, and affiliates of EIV and the Minority Investor (in such capacities, the "Secured Noteholders"), as purchaser parties thereto, with EIV Viridis Chemical, LLC as the collateral agent.
  • The Secured Notes are secured by interests and/or liens on substantially all of the assets of the Secured Notes Parties.
  • Interest on the Secured Notes is 12% per annum while no default has occurred, and 15% upon the occurrence and during the continuance of an event in default.

Subordinated Unsecured Note

• In connection with the Company's purchase of Prairie Catalytic, Prairie Catalytic's court-appointed receiver agreed to accept an unsecured subordinated note to Viridis in the principal amount of $4 million (the "Subordinated Unsecured Note").
  • The Subordinated Unsecured Note is documented in that certain Subordinated Promissory Note, dated as of February 5, 2021, among Viridis and the noteholders party thereto (the "Subordinated Noteholders"), and is subordinated to the Note Purchase Agreement via an Intercreditor Agreement, dated as of March 7, 2025, among the Subordinated Noteholders and the collateral agent under the Secured Notes.
  • Interest on the Subordinated Unsecured Note accrues on the unpaid principal balance at a rate of 7% per annum.
  • As of the Petition Date, the Debtors' aggregate principal outstanding unsecured debt obligations under the Subordinated Unsecured Note total approximately $3.5 million, plus accrued and unpaid interest.

Trade and Other Unsecured Liabilities

• In the ordinary course of business, the Debtors have historically relied on numerous trade vendors to operate their businesses, including with respect to the relocation of the plant.
  • These trade vendors include suppliers of engineering, construction, and equipment services for the reconstruction of the Debtors' plant in Peoria.
• As of the Petition Date, the Debtors estimate they may owe up to approximately $4.0 million in unsecured trade claims.
• Sterling and various subcontractors have asserted mechanics' liens on account of purported claims totaling approximately $6.5 million.
  • Such liens and asserted claim amounts are disputed and are under review by the Company, but to the extent such liens and claims are valid, these amounts may be secured and the amount of estimated unsecured trade claims may be lower.

Equity Interests

• EIV holds approximately 87.9% of Viridis' common stock and approximately 93% of Viridis' Class A preferred stock.
• The Minority Investor holds approximately 12% of Viridis' common stock and approximately 7% of Viridis' Class A preferred stock.
• The remaining approximately 0.1% of Viridis' common stock is held by management.
• Historically, Viridis performed capital calls approximately every three months.

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Events Leading to Bankruptcy

Cost Overruns and Construction Delays

The relocation of the plant to Peoria, Illinois was originally expected to be completed by December 2025. However, the Company has experienced significant cost overruns and construction delays that have ultimately rendered completion of the Peoria plant project unfeasible absent additional capital.

• In addition to cost overruns associated with the construction, the Company faced unforeseen additional costs related to (i) additional regulatory requirements associated with locating the plant in an urban area, (ii) unexpected equipment maintenance, (iii) increased transportation costs, and (iv) the imposition of tariffs on Indian steel imports, among other costs.
• While the majority of the plant components and equipment arrived on-site in Peoria from the Nebraska Plant in summer 2025, the Company decided to replace a key component—the dehydration system responsible for removing water from the ethanol stream—due to reliability issues with the existing system at the Nebraska Plant.
  • The Company contracted with an India-based company—the only company in the world that could supply a dehydration system of the required size and specifications—to design and construct replacement equipment that would be imported from India in roughly 20 shipping containers, then reassembled and integrated with the plant at the Peoria site.
  • However, the delivery of the dehydration unit was unexpectedly delayed due to the imposition of new tariffs and transportation logistics.
  • While certain pieces of the dehydration unit have been delivered to Peoria, some pieces of the dehydration unit currently sit in shipping containers in a bonded warehouse in the port of entry in Houston.
  • Notably, the plant cannot function without this key component.

Sterling Contract Disputes

The Sterling Contract is a "time and materials" master services agreement, with work to be completed pursuant to multiple purchase orders agreed to by the Company and Sterling.

• The initial total budgeted cost of construction of the Peoria plant was approximately $26.7 million, with the estimate for the total "Project Scope" in the Sterling Contract being approximately $14.9 million.
• However, the actual cost increased significantly over time, well in excess of the budget.
• Due, in part, to multiple replacements of Sterling's project manager, reports regarding costs associated with the project were inconsistent in their frequency, content, and quality, and the project forecasts began to increase.
• In July 2025, Sterling began presenting invoices for work completed that were significantly higher than any forecast.
• Ultimately, the Company paid Sterling a total of $21.5 million from January 2025 through December 2025.
• Sterling asserts, and the Company disputes, that the Company still owes Sterling an additional approximately $6.1 million on account of work Sterling did at the plant site, approximately half of which the Company submits was on account of unapproved expenses incurred outside of purchase orders.
• Completion of the plant is expected to require several more million dollars, vastly in excess of the original budget.
• On February 6, 2026, Sterling recorded a mechanics' lien in Peoria County (the "Sterling Lien") on not only the property the Debtors lease from BioUrja, but also on what appears to be the entire BioUrja property, including the portion on which BioUrja's own plant is located, to secure its asserted claim of approximately $6.1 million against the Company.
  • The Company reserves all rights with regard to, and likely will contest, the amount and validity of the Sterling Lien.

Market Deterioration and Pause of Construction

Amidst cost overruns, Viridis was also faced with broader weakness in the chemical market and ethyl acetate market pricing deteriorated significantly.

• In the second half of 2025, the price difference between ethyl acetate and ethanol, known as the "spread," fell by approximately 26%.

Given the market distress, significant cost overruns and construction delays, the Company made the decision to pause construction in December 2025 and turn its efforts to liquidity preservation while exploring strategic alternatives.

• This, in turn, resulted in pausing vendor payments—including to Sterling—while the Company evaluated its path forward.

Liquidity Pressures

Because it is not currently operational, the Company has primarily depended on borrowings under its Note Purchase Agreement and capital calls from its equity holders as its source of cash and liquidity. Yet, the Company has significant accrued and outstanding unsecured trade debt, largely comprised of unpaid obligations to vendors and contractors who supplied equipment and engineering and construction services for the Peoria plant reconstruction.

• In light of these balance sheet and liquidity challenges, the Company's management took swift actions to preserve capital beginning in December 2025, including immediate cessation of construction activity at the Peoria plant, laying off employees, pausing vendor payments, and delaying certain tariff and domestic shipping costs by placing the dehydration unit in a bonded warehouse at the port of entry.

Appointment of Special Committee and Engagement of Advisors

In December 2025, the Company identified and appointed Mark McDermott, a former restructuring lawyer at an international law firm with over three decades of experience, as an independent member of the board of managers of Viridis (the "Board") and subsequently appointed him as the sole member of a newly formed special committee of the Board (the "Special Committee").

• Mr. McDermott, as the sole member of the Special Committee, is tasked with reviewing potential transactions and making recommendations to the Board related to the same, and is delegated with binding decision-making authority with respect to matters that constitute, or are reasonably likely to constitute, a conflict of interest between Viridis and its related parties.

Also in December 2025, the Company engaged Carl Marks Advisors ("CMA") as financial advisor to assist with forecasting cash flow and analyzing and managing liquidity.

• In early February 2026, the Company engaged Vinson & Elkins LLP as legal counsel to advise on strategic alternatives.
• Around the same time, the Company further engaged CMA in an additional role as investment banker to work with the Company on exploring all available options to preserve and maximize value, including running a process to seek additional capital investment or, alternatively, sell the Company or its assets.
• In addition, the Company engaged Zachry Group as engineering consultant to conduct a study and produce a report detailing the estimated cost and timeline required to complete construction the Peoria plant, with a preliminary report projected to be available in mid-March 2026 and a final report to follow.

Investor Outreach Process

In mid-February 2026, the Company, with the assistance of CMA, began a process (the "Investor Outreach Process") to identify and generate investor interest for an investment or other transaction that would allow the Company to complete construction and return to operations.

• During the Investor Outreach Process, the Debtors, with the assistance of CMA, spent significant time preparing marketing materials and began soliciting interest from a significant number of financial and strategic parties that were identified as the most likely to be interested in a potential transaction with the Debtors.
• These efforts are ongoing as of the Petition Date.

Chapter 11 Filing and Go-Forward Strategy

Notwithstanding significant efforts by the Debtors to explore viable alternatives, the Debtors face a diminishing liquidity position with no current operations to fund working capital and have been in payment default on the Company's funded debt since September 2025.

• These challenges, plus the assertion of the Sterling Lien and various subcontractor mechanics liens made continued out-of-court efforts to maximize value untenable.

In light of these circumstances, the Debtors' board of managers and members, as applicable, determined that the best option to preserve and maximize value, and to avoid a potential free-for-all race to the courthouse by various creditor constituencies, was to seek the protection afforded by chapter 11 of the Bankruptcy Code.

• The Debtors believe the tools afforded by the Bankruptcy Code and the transparency afforded by the chapter 11 process will provide them with the necessary breathing spell to continue working with Zachry Group to ascertain the estimated cost and timeline required to complete construction the Peoria plant and run a robust process to attract one or more investors to provide new capital to complete the plant and resume operations or otherwise purchase the Company's assets, which the Debtors believe is their best path for maximizing value for the benefit of their stakeholders.
• Additionally, the Debtors continue to explore options for postpetition financing in order to ensure the Debtors have the runway and liquidity to run a robust sale process for the benefit of all stakeholders.