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Defaulted California Plant Turns to Burned Muni Holders for Cash

  • Venture that turns rice straw into panels needs $18 million
  • High board prices, surging demand for junk muni debt pave way
A rice harvest in Williams, California.
A rice harvest in Williams, California.Photographer: Ken James/Bloomberg

In the heart of California’s rice country, a project that dealt municipal-bond investors one of the biggest high-yield defaults of the past decade is about to ask them for more cash. And there’s every reason to expect burned debtholders to go along.

After years of delay and setbacks including the pandemic and a fire, CalPlant I LLC last year finally finished building a facility that produces a unique type of fiberboard made from a rice-cultivation byproduct called rice straw. The company has equity backing from entities including a subsidiary of the Teachers Insurance & Annuity Association of America and has already borrowed $344 million since 2017 through sales of unrated tax-free debt, most of which is in default.