Synagro Files for Bankruptcy With Plan for Sale to EQT

Synagro Technologies Inc., a biosolids-management company owned by Carlyle Group LP, sought bankruptcy protection with a plan to sell most of its assets to private-equity firm EQT Infrastructure II LP.

The Baltimore-based company listed assets of more than $10 million and debt of more than $100 million in Chapter 11 papers filed today in U.S. Bankruptcy Court in Wilmington, Delaware. Twenty-nine affiliates also sought protection. Both ST Interco Inc. and Synagro-WWT Inc. listed assets of more than $100 million against debt of more than $500 million.

“Operating results for the company are actually very good, it’s just levered up too much on the balance sheet,” Chief Executive Officer Eric Zimmer said in an interview. The best way to address the debt is through Chapter 11, he said.

EQT, based in Sweden, agreed to be the lead bidder at a court-supervised auction with an offer of about $455 million. The bid may be topped at auction and any sale requires court approval. EQT is a private-equity group serving northern Europe, with investments in Europe, Asia and the U.S., according to the statement. It has offices in New York, London, Hong Kong and Singapore, among other places.

Washington-based Carlyle, the world’s second-biggest private-equity firm by assets, acquired Synagro in 2007 for $462 million plus the assumption of $310 million in debt.

Municipal Wastewater

Synagro, which treats water and wastewater for municipal and industrial customers, contacted more than 100 potential buyers and EQT offered the highest price, Zimmer said. Revenue was $320 million last year, he said. Customers include the cities of New York, Houston, Baltimore and Honolulu, according to its website.

The company serves more than 600 municipal and industrial water and wastewater facilities and is the largest recycler of organic byproducts in the U.S., the company said in a statement today. Synagro processes waste to produce environmentally friendly products including fertilizer. The company was founded in 1986, and has 800 employees in 34 states from Connecticut to California, according to its website.

“Everything that we are doing right now has one overriding goal, and that is to make Synagro a stronger company now and for years to come,” Zimmer said. The company will operate as usual while in bankruptcy.

The company said in a statement that some existing lenders have committed to providing $30 million to help Synagro through the bankruptcy process, subject to a judge’s approval.

Unsecured Creditors

Synagro’s largest unsecured creditors listed in court papers include U.S. Bank, as administrative agent for second-lien lenders owed $100.4 million; Waste Management Inc., owed $583,663; and Automotive Rentals Inc., owed $583,198.

EQT Partners AB closed its second infrastructure investment fund in January after raising about 1.93 billion euros, according to its website. The first closed in 2008 after raising 1.2 billion euros. EQT Partners manages 15 funds and has raised over 20 billion euros. It has invested more than 11 billion euros in about 110 companies and exited about 60.

EQT Infrastructure II recently bought liquid-storage company Westway Group Inc. on Dec. 20 for $6.70 a share, or about $419 million according to a press release on EQT’s website.

“EQT brings a tremendous amount of industry knowledge and expertise to the table and believes both in our business and in the future of Synagro,” said Zimmer.

The bankruptcy petitions were filed by lawyers, including partner Mark Chehi, at Skadden Arps Slate Meagher & Flom LLP in Wilmington.

The case is In re Synagro Technologies Inc., 13-bk-11041, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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