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German Pellets files for insolvency

10 Feb 2016 16:48 GMT
German Pellets files for insolvency

London, 10 February (Argus) — One of the world's largest wood pellet producers, German Pellets, filed for insolvency with Germany's Schwerin district court today.

German Pellets has requested to restructure through bankruptcy under its own administration, the company said. The court's decision is expected shortly, it added.

The producer has faced troubles in recent weeks concerning its 2016 bond, which is due to mature on 1 April. A bondholder meeting to propose a restructuring of German Pellets' debt that had been scheduled for today was cancelled yesterday.

The producer came into financial difficulties because of the fall in oil prices that has pressured wood pellet prices, in addition to a slump in pellet sales owing to successive mild winters, German Pellets said. The firm's acquisition of stove manufacturer Kago Waermesysteme in 2010 had also been a "bad investment", German Pellets said. Kago applied for insolvency in January.

German Pellets operates 12 pellet production plants in Germany and Austria, and two in the US with a combined capacity of over 2mn t/yr.

The impact on the wood pellet market is difficult to assess at this early stage, market participants said. German Pellets has long-term offtake agreements with European utilities for supply from its US plants and has a large market share of the residential pellet market in Germany and Austria, as well as supplying other countries, including Italy.

Its business operations will continue in full, German Pellets said.

At least some of the company's production plants in Germany are not operating at present, market participants said.

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