Dixie Pellets files for bankruptcy
Published 1:08 am Wednesday, September 16, 2009
SELMA — Just weeks after closing down its operation here, managers for Dixie Pellets filed for chapter 11 protection in the U.S. Bankruptcy Court in Birmingham.
The court documents were filed electronically Sunday and Monday. Those documents signed by Patrick E. Molony, executive vice president, show Dixie Pellets reported gross revenues of $11.4 million for the 12 months ending July 30, posted against a loss of $14 million.
The company owes more than $100,000 to creditors, according to court documents.
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No one could be reached at the company’s 38-acre site on the Alabama River just outside Selma.
Court documents show the management of Dixie Pellets gave several reasons for filing for bankruptcy.
The company cited a downturn in the housing market that limited its supply of dry wood used as raw material. Dixie Pellets takes wood waste and processes it into pellets used for heating. These products are used chiefly in European nations.
Additionally, the company had what it called “an unexpected working capital shortfall,” causing it to shut down the Selma plant and put 72 workers on unemployment.
The shortfall is about $3 million in receivables from Essent Energy Trading BV, based in Switzerland. Among other things, Essent offers renewal energy products to customers.
Court documents reveal Essent’s complaint of Dixie Pellet’s being in breach of contract regarding supply. However, attorneys for Dixie Pellets pointed out the Essent continued to take shipments of the pellets.
Now the two companies are in arbitration in London.
Pellets also said it had experienced equipment problems since beginning operations in 2008.
Startup costs had tallied more than the company expected.
In addition to owing creditors for doing business, Dixie Pellets also has a $67.2 million secured debt with Calyon Bank of New York.
Additionally, the company received a letter of credit for $30 million issued by Regions Bank for Harbert DP LLC.
Chapter 11 bankruptcy filings allow businesses to continue operating while they reorganize their debts