Rise and fall of a giant

Founded in 2004, the company managed by Peter Leibold grew to become the world's largest pellet producer in a matter of only one decade. With approximately 600 employees, the company has operations in Germany, Austria and the USA. In Germany alone production capacity amounts to about 850,000 t/yr (excluding joint ventures). This represents approximately one quarter of Germany's total capacity or the entire Austrian pellet consumption in 2015. After German Pellets had set up several plants on the green meadow in Germany, the company acquired the FireStixx group, Vilsbiburg/DE, in 2011. 2012 saw the acquisition of the Austrian Hott's group with three production facilities. Furthermore, the company ran marketing activities for WUN bioenergy, Biopellet in Magdeburg/DE and Sonnen Pellets, Buchholz/DE.

Across the Atlantic

In 2013 the company from Wismar started up their first American pellet factory in Woodville, Texas, with 500,000 tons of production capacity. Meanwhile, the company has a capacity of more than 1.7 million t overseas – quantities which were entirely destined for the European market. To finance the US plants and the expansion of the logistics, corporate bonds were issued in 2011 and 2013, which yielded almost €150 million. Even at the time when these bonds were first issued, economists already criticized that the equity ratio – not even 12% – was very low. On top of all that, German Pellets planned to build a sawmill with an output of 250,000 m3 of sawn timber alongside the pelletizing plant in Woodville.

Refinancing unclear

The company's problems became acute over the last few months when the prices of German Pellets bonds began to twindle. In a matter of a few weeks, the value of the paper slipped massively and, according to the Stuttgart Stock Exchange, recently traded at less than 0.5% of its nominal value. As the reason for the rapid decline stockbrokers identified the unclear refinancing of the bond 2011/16 at the amount of € 52.4 million, which would have been due in late March. In order to gain time, the company tried to convene a creditors' meeting on 10 February. There German Pellets wanted to propose to the creditors to enhance and adapt the partial debenture 2011/16. The intention was to extend the loan for two years and to introduce a first-rate collateral by 50% of the shares in German Pellets. In addition, the interest rate should be reduced from 7.25% then to 5.25%.

Production shutdowns

Early last week, however, an increasing number of media reported temporary production shutdowns at several German Pellets locations. "Missing raw material supplies due of unpaid invoices", industry experts found to be the cause. German Pellets declined to comment on the media reports when Timber-Online inquired. One of the companies, which declared a contract manufacturing agreement with German Pellets null and void due to outstanding payments, was Holzindustrie Torgau (HIT).

Insolvency instead of creditors' meeting

On February 10 followed the big bang. Instead of holding the planned meeting of creditors, the company filed for insolency at the district court of Schwerin. Unlike intended by German Pellets, the application for self-administered insolvency was rejected, as new interim CEO Frank Günther explained to the Handelsblatt newpaper. Bettina Schmudde was appointed as external insolvency administrator of the international law firm White & Case.

The prosecutor investigates

Now the Rostock prosecutor has launched an investigation against Leibold. "It is about the violation of property rights", a spokesman for the Prosecutor General's Office in Rostock told the Handelsblatt. A supplier may have filed criminal charges for embezzlement before the insolvency was made public. In addition, there are also charges of bondholders for investment fraud.