Cereplast files for Chapter 11 Protection

Cereplast, Inc., a leading manufacturer of proprietary biobased, compostable and sustainable bioplastics, announced that the it has filed voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Indiana. In its press statement, Cereplast says it has taken this action to strengthen its balance sheet, clean up its capitalisation structure and gain financial flexibility as it continues to realign its operations. The company intends to continue to operate during the reorganisation process.

As part of the reorganisation, the Cereplast is taking steps to align its cost structure with the realities of market demand. The company expects to redirect its operations in two directions: (1) toward traditional compounded products and recycling polyolefin and (2) bioplastic made of diversified feedstock including algae and polylactic acid.

"We intend to use the reorganisation process to help implement our plan to lower costs, stabilize our businesses, grow revenue and diversify our product lines," said Frederic Scheer, Chief Executive Officer. "We have taken a number of steps to improve our operations over the past few months and we were making great progress; however, the lack of traction of bioplastics demand in the United States, the repetitive delays in implementation of the bioplastic regulation in Europe and especially in Italy combined with the legal problems created by several of our lenders made clear to our Board that reorganisation was the proper path forward. We believe that this reorganisation will enable us to reduce our debt and implement operational changes, while maintaining our commitment to the environment."   

He continued, "We appreciate the ongoing dedication of our employees, whose hard work is critical to our success and the future of our company. Regrettably, as a result of this reorganisation, jobs will be impacted during the transition period."

In conjunction with its reorganisation, Cereplast is actively negotiating a debtor-in-possession (DIP) financing from several interested parties. On Court approval, the new financing and cash generated from the company's ongoing operations will be used to support the business during the reorganisation process.

The company intends to file various motions with the Court in support of its reorganisation, including requesting authorisation to continue paying employee wages and providing health care and other benefits. The company will also ask for authority to continue existing customer programs and intends to pay vendors for goods and services as authorised by the Court.