(Bloomberg) -- Restoration Forest Products, a lumber company based in Arizona, filed for bankruptcy on Monday after the pandemic upended construction on a new production facility and a critical governmental contract fell through. 

The manufacturer listed liabilities of $367 million and assets of at least $100 million in court documents. The Chapter 11 filing lets Restoration Forest Products keep operating while it seeks approval of its bankruptcy plan. 

The company, which produces everything from lumber to wood chips, has already struck a deal with stakeholders in which it intends to slash more than $300 million in debt. As part of the bankruptcy plan, Invesco has agreed to give the firm $95 million to help finance the court process, according to a statement. After emerging from bankruptcy, Invesco is slated to own the company along with its current equity sponsor, Lateral Investment Management. 

The plan and financing are subject to court approval.

Restoration Forest Products touts its focus on sustainability because it works with the US Forest Service to mitigate wildfire risk by clearing brush and other low-lying plants that can stoke flames. In early 2022, the company raised nearly $200 million in sustainability-linked bonds, according to its website. The bonds were issued by the Arizona Industrial Development Authority and were sold in two parts. About $113 million of Series A bonds were purchased by affiliates of Invesco while about $87 million of Series B bonds were bought by affiliates of Lateral. 

Series A bondholders are projected to recover 20% to 35%, according to the prepackaged bankruptcy plan. Series B bondholders are projected to get pennies on the dollar.

Road to Bankruptcy

The manufacturer’s woes began in 2020 when it was forced to temporarily shut down construction on a new facility because of the pandemic, according to a sworn statement from Kenneth Latz, the firm’s chief restructuring officer. Shortly after, demand for lumber and machinery spiked, driving up costs for the company as it clamored to finish the facility. 

It plans to complete building the facility by the second quarter of this year, according to the statement.

The company’s financial situation worsened in 2021, when a key contract with the US Forest Service collapsed after a two-year application process. Bad weather over subsequent winters further hurt the company, pushing it to default on some of its debt last year.

The case is Restoration Forest Products Group LLC, 24-10120, US Bankruptcy Court for the District of Delaware (Wilmington).

--With assistance from Martin Z. Braun.

(Updates with details on recoveries for bondholders in paragraph six. Previous version corrected who purchased the sustainability-linked bonds in paragraph five.)

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