(Bloomberg) -- A company building a novel factory in California that has defaulted on its debt payments won the state’s approval Tuesday to sell an additional $53 million in tax-exempt bonds.
The California Pollution Control Financing Authority approved the request of CalPlant I LLC, which is constructing the world’s first commercial facility converting rice cultivation debris into fiberboard. The company plans to get the consent of its bondholders before issuing the debt, which it anticipates selling Sept. 29, it said in a filing.
Proceeds will go to the operation’s costs and not to cover debt service for its previous unrated tax-free bonds, the company said. This year it skipped payments on a $228 million issue sold in 2017 and on last year’s $74 million deal.
The sale will test investors’ appetite for risk. Already, a company backed by Fortress Investment Group private equity funds plans to sell a record amount of unrated municipal bonds this month to finance a passenger train to Las Vegas from a Mojave Desert town, after California and Nevada officials granted the company the states’ limited allotment of municipal bonds for such projects.
The plant, located in Willows, within a rice growing region, is expected to produce its first medium density fiberboard in November and open for commercial operations in May 2021, according to a filing.
“We are nearing the finish line,” said company co-founder Jerry Uhland during the Tuesday meeting.
Citigroup Global Markets Inc. and Stifel, Nicolaus & Company, Inc. will underwrite the debt, which will be fixed-rate green bonds. Existing bond holders are expected to purchase the new issue, said Uhland, who called them “supporters and believers of this project.”
A subsidiary of Teachers Insurance and Annuity Association of America makes up a third of the holding company’s ownership, and manufacturer Columbia Forest Products Inc. accounts for about 15%.
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