USA Synthetic Fuel files bankruptcy, inks $15 million asset sale deal

By Caroline Salls

Pittsburgh, March 20 – USA Synthetic Fuel Corp. filed Chapter 11 bankruptcy on March 17 in the U.S. Bankruptcy Court for the District of Delaware.

The company entered into a stalking horse agreement under which Third Eye Capital Corp. would purchase substantially all of the assets of USA Synthetic and Lima Energy, subject to receipt of higher bids in a court-supervised auction process.

Specifically, Third Eye agreed to pay $15 million for the assets, plus the assumption of liabilities, including all cure amounts.

USA Synthetic said the buyer, in its capacity as administrative agent under the a note purchase agreement and unit purchase agreement, will surrender and release a portion of the company’s debtor-in-possession loan, a portion of the note obligations, a portion of the break-up fee and expense reimbursement to be paid if the stalking horse bidder is not the high bidder and credit the sellers in the amount of $15 million to satisfy payment of the purchase price at closing.

The proposed break-up fee is $450,000, and up to $1 million of Third Eye’s expenses would be reimbursed if it is not the high bidder.

Competing bids are due by 5 p.m. ET on the date that is 55 days after USA Synthetic’s bankruptcy filing.

The minimum overbid amount will be $500,000. However, the company can elect to decrease that amount, provided that it is no lower than $100,000.

DIP financing

In connection with the bankruptcy filing, the company obtained a commitment for $765,970 in DIP financing.

Third Eye Capital is the administrative and collateral agent.

The DIP loan will mature on the earliest of 75 days from the bankruptcy filing date, the effective date of a plan of reorganization or liquidation, closing of a sale of all or substantially all company assets, the occurrence of an event of default and the entry of an order approving alternative or additional DIP financing.

Interest will be 12%.

Debt details

According to court documents, USA Synthetic had $7.9 million of total assets and $99.35 million of total debt as of Feb. 20.

The company’s largest unsecured creditors are Phillips 66 Co. of Houston with a $16 million contract claim and Dorsey & Whitney, LLP of Minneapolis with a $3.23 million services claim.

Harry and Lynne Graves own 39.96% of the company’s voting securities and TH Graves, PF Graves and JH Graves own 11%.

The company is represented by Morris Nichols Arsht & Tunnell LLP.

Cincinnati’s USA Synthetic is a provider of clean energy systems. The Chapter 11 case number is 15-10599.

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