The owner of a Texas facility that recycles metals extracted from oil-refinery waste filed for bankruptcy after the venture was marred by equipment failures and commodity price volatility.
Aleon Metals LLC, which is responsible for $294 million of municipal debt that financed the construction of the recycling plant and another under development, filed for Chapter 11 Sunday in US Bankruptcy Court for the Southern District of Texas.
Aleon said it secured $188 million of financing from bondholders to continue operations while it seeks a buyer during the bankruptcy proceedings. Jefferies Financial Group Inc., Aleon’s investment banker, will market the businesses.
“We’ve worked diligently to streamline our operations and position Aleon for continued growth,” said Tarun Bhatt, the chief executive officer of Aleon, said in a statement.
The company funded the Freeport, Texas, operation with a series of bond issues from 2019 through 2023 through the Brazoria Industrial Development Corp., a government agency that helps such projects obtain financing.
The bonds carried interest rates as high as 12%, reflecting the risks, and have since tumbled in value. The senior bonds — which have the highest legal protections — are valued at about 70 cents on the dollar, with others pegged at less than half that, according to Bloomberg’s bond-pricing service.
Other recycling projects financed in the municipal-bond market have been plagued by a range of issues in recent years, including lower-than-expected demand, operations setbacks and ballooning production costs.
In Aleon’s case, vanadium and molybdenum, the primary metals recovered at the oil-recycling plant, were subject to significant volatility in commodity prices, resulting in unpredictable revenue streams and periods of negative cash flow, according to the bankruptcy filing.
In addition, the scrubber that removed sulfur dioxide from gases failed, causing production to plummet. Volume at the facility dropped to about 2,131 tons a year, far below its 55,000 ton capacity.
The case is In re Aleon Metals, LLC, et al, number 25-90305, Bankruptcy Court, Southern District of Texas.
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