Biomass Leader Enviva Plunges Amid Debt Chaos, Replaces CEO

(Bloomberg) -- Enviva Inc., the world’s largest producer of wood pellets for power plants, warned it may not be able to continue operating after losses surged. The company replaced its leadership and announced plans to review its debt. 

Shares of the Maryland-based company plunged 79%, their biggest intraday drop on record. The rapid selloff triggered multiple volatility-related trading halts for the stock and dragged it to a fresh low.

Enviva posted an $85.2 million loss for the third quarter and is considering working with advisers Lazard Ltd., Alvarez & Marsal, and Vinson & Elkins LLP on a comprehensive review of its debt structure, it said in a statement Thursday. The company also appointed Chief Financial Officer Glenn Nunziata to replace Chief Executive Officer Thomas Meth, who continues as president of the firm.

“These conditions and events in the aggregate raise substantial doubt regarding the company’s ability to continue as a going concern,” Enviva said.

The company’s loss, more than four times bigger than the same quarter last year, comes as Enviva struggles with liquidity and significant operational challenges at its pellet plants. Enviva has positioned its products as a cleaner alternative to fuels like coal for generating electricity. New power plants burning biomass are planned, or have opened recently, in areas including the US, UK, Germany, Japan and the Ivory Coast.

William Strauss, a biomass market analyst at FutureMetrics LLC, said that Enviva was feeling the pain from deals made at cheap rates that left little room for external shocks. “It is highly unlikely that they will stop producing,” he said in emailed comments. “However, the potential for a restructuring is real.”

Enviva warned that it may become in breach of some of the terms of a $570 million senior secured credit facility potentially as soon as its year-end reporting date. As of September 30, it had drawn down the full amount of the facility.

The company’s outstanding $750 million senior notes maturing in 2026 will be included in the review of the capital structure, the company said. These 6.5% notes plunged 31.75 cents on the dollar to trade at 32.5 cents on Thursday morning, according to Trace. The note now yields more than 72%.

Bonds of Graanul Invest, an Estonia-based biomass supplier, dropped 4.4 cents on the euro to 66.4 cents, according to data compiled by Bloomberg. They’re set for the largest daily fall since the bonds were issued in 2021.

Enviva is a key supplier to Drax Group Plc, which produces almost 10% of the UK’s electricity and is the world’s largest consumer of wood pellets. Drax also has its own fleet of pellet plants in the US and Canada.

(Updates shares in second paragraph, bonds in eighth and ninth paragraphs.)

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