Ultura Unit Files Chapter 11 to Sell Membrane Business

Ultura (Oceanside) Inc., a developer of water-treatment products, filed a Chapter 11 petition on Oct. 20 in Delaware to sell its membrane business to pre-bankruptcy lender UAC Finance Inc. in exchange for about $25 million of debt, absent a better bid at auction.

UAC, an affiliate of venture capital investor True North Venture Partners LP, bought the existing senior secured debt from Hercules Technology Growth Capital Inc. in August, according to court papers. If approved at a hearing tomorrow, UAC will allow immediate use of cash representing collateral for its secured claims.

The lender will later provide a bankruptcy loan of about $2.3 million to fund the Chapter 11 effort through a sale, according to court papers.

For almost all the assets of the membrane business, UAC will bid pre- and post-bankruptcy debt in lieu of cash and pay all known trade claims to a maximum of $585,000. The company said that amount should pay all its trade suppliers in full.

The membrane products are marketed under the Rochem and Sepro brands. Intellectual property, purchased by the company from parent Ultura Inc. for $250,000 before the bankruptcy, is part of the proposed sale.

In light of pre-bankruptcy marketing efforts, the “precipitous” financial condition of the business and sale contract requirements, the company asked the court to set a Nov. 25 bid deadline, a Dec. 3 auction and a sale-approval hearing no later than Dec. 4.

To help complete the membrane business sale by Dec. 12, the company said it wants to implement an incentive plan paying some key employees as much as $113,000 in the aggregate.

Affiliate Ultura (LA) Inc., also in bankruptcy, will be sold or wound down in Chapter 11, according to court papers.

The petitions of the California-based companies each show assets of as much as $10 million and liabilities of more than $10 million. Parent Ultura isn’t in bankruptcy.

The case is In re Ultura (LA) Inc., 14-bk-12382, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Before it's here, it's on the Bloomberg Terminal.