Bankruptcy court approves Dixie Pellets sale

Published 7:02 pm Monday, May 17, 2010

BIRMINGHAM — The U.S. Bankruptcy Court here has approved a sale of various assets of Dixie Pellets LLC, located in Selma.

Dixie Pellets filed for Chapter 11 bankruptcy in September 2009, claiming an unexpected working capital shortfall, according to papers filed in the bankruptcy court. The company owned and operated a biomass production plant in Selma. Chapter 11 bankruptcy filings allow businesses to continue operating while they reorganize their debts.

In March the company asked the court to allow a sale of almost all of its assets, including the plant, barges and a towboat. Dixie Pellets hired Morgan Joseph & Co. Inc. as its investment banker to set up the sale, which would see assets to the highest bidder.

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Zilkha Biomass Energy of Houston purchased the Dixie Pellets plant at 1256 County Road 78 in Selma for $6,250,000. That site includes 25 acres that once was a state docks grain facility. In 2008 Dallas County constructed a $900,000 road to Dixie Pellets and International Paper to allow better access. The money came from the state.

Fortunately for the county, said Dallas County Probate Judge Kim Ballard, the state only wanted $70,000 of its money for the construction returned as fallout from Dixie Pellets closing its doors.

“The state worked with me real well,” Ballard said.

International Paper has benefited from using the access road, the probate judge said.

It’s uncertain what will happen to the property. No one from Zilkha was available Monday to discuss the sale.

Wayne Vardaman, executive director of the Dallas County Economic Development Authority, said the EDA is working on alternatives, but declined to elaborate.

Other assets sold included 10 barges to BKM Holding LLC for $3,800,000 and a tugboat, “Senator Sam” to David Ray for $30,000, according to court documents. The court documents did not give address or locations for BKM Holding or Ray.

In a report to the court filed Monday, Dixie Pellets filed a statement saying it had yet to pay $188,165.92 owed in property taxes, real and personal, to Dallas County.

Creditors asserted $35,285,693.69 in claims against the company, which did not include accruing interest, attorneys’ fees and other recoverable charges allowed under law.

Several civil cases are associated with this bankruptcy. Three of the five cases involving Harbert DP LLC, Harbert Power Fund III LLC and Rayco Industrial Inc. of Selma are scheduled for a hearing Monday, June 7, in Birmingham.