CASE PROFILE: Biotechnology company Amyris enters bankruptcy with USD 190m DIP, hopes for consensual restructuring deal

Legal Analysis 10 August

CASE PROFILE: Biotechnology company Amyris enters bankruptcy with USD 190m DIP, hopes for consensual restructuring deal

Amyris Inc, a company that manufactures synthetic biological compounds used in a variety of consumer, pharmaceutical and food products, kicked off a bankruptcy case with the goal of restructuring its more than USD 1bn in funded debt while also pursuing a sale of an unprofitable consumer brands business segment.

Amyris filed for Chapter 11 protection on Wednesday (9 August) in the US Bankruptcy Court for the District of Delaware, reporting assets of USD 679.68m as of 31 March, when it submitted its most recent quarterly disclosure with the US Securities and Exchange Commission, against USD 1.33bn in total debts.

The company comes into the bankruptcy process with USD 190m in debtor-in-possession (DIP) financing lined up from Foris Ventures, an existing lender, and the goal of finding a buyer for its consumer brands business segment and refocus the company on its core business of developing synthetic biological compounds with a variety of applications, according to court documents.

A first day hearing has not yet been scheduled. Judge Thomas Horan has been assigned to oversee the Chapter 11 case.

DebtwireDockets: Amyris Inc

The company

Amyris bills itself as one of the world’s top manufacturers of ingredients made with eco-friendly synthetic biology, using a fermentation technology that has applications in flavors and fragrances, sweeteners, cosmetics, pharmaceuticals and other consumer products, according to a first day declaration from Han Kieftenbeld, the CFO and interim CEO of Amyris.

“Amyris has developed sustainable and scalable alternatives to these environmentally damaging processes by using microbes (primarily yeast) to transform simple, sustainably grown, plant-based sugars into ingredients that are used in everything from lifesaving vaccines to commonly used consumer products,” explained Kieftenbeld.

The company first started in 2003, when a foundation grant funded its efforts to create an ingredient used in anti-malaria treatments that was historically sourced from a plant that was in limited supply and subject to fluctuations in price. Amyris ultimately developed a semi-synthetic version of the substance, artemisinin, that now makes that anti-malaria treatment widely. At a high level, the company’s process involves genetic engineering of yeast strains that are then fermented in sugarcane syrup, according to the first day declaration.

Following the anti-malaria compound, the company used similar fermentation technology to put on the market 16 unique products. In addition to the core business of developing synthetic biological compounds, Amyris has also developed a line of “clean beauty brands” that it sells through direct-to-consumer online platforms and a network of retailers, including Sephora, Target and Walmart, said Kieftenbeld. Brands under the consumer products business segment include Biossance skincare products, Pipette baby skincare products, Purecane zero-calorie sweeteners, and 4U by Tia hair care products sold exclusively at Walmart.

Amyris has several facilities, including a headquarters, lab and pilot-scale production plant in Emeryville, California, as well as a 99% ownership interest in a commercial-scale production plant in Leland, North Carolina. The company and certain non-debtor subsidiaries also have operations in Brazil.

As of its Chapter 11 petition date, Amyris had 708 employees, with 557 working on an annual salary basis and 151 working on an hourly basis. Kieftenbeld said that on 26 June and 7 August of this year, the company announced reductions in force that trimmed the workforce by about 30%.

The debt

Amyris comes into the Chapter 11 case with USD 1.06bn in secured and unsecured funded debt. On the secured side, the company owes USD 295m on prepetition loans from its now-DIP lender Foris, and USD 74m on a prepetition loan from DSM Finance BV.

On the unsecured side, the company’s single largest creditor is US Bank NA as trustee for Amyris’s USD 690m in 1.5% convertible unsecured notes due 2026. The next largest unsecured claim comes from Cosan US LLC and relates to a settlement agreement, according to bankruptcy court documents. Kieftenbeld pegged the company’s overall unsecured trade debt at about USD 95m.

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The descent

Kieftenbeld lays blame for Amyris’s financial strains on several factors, including that the company has always operated at a loss and required a continuing stream of equity and debt financing. During the past two years, the company’s total revenues have dropped by more than 20%—Amyris posted USD 341.8m in revenue in 2021, before a drop to USD 269.8m in 2022.

To try to address some of the strain, Amyris in 2022 implemented a restructuring strategy that it dubbed “fit-to-win,” which involved price hikes on targeted products, along with efforts to reduce production, shipping and other costs. In April 2023, the company brought in PricewaterhouseCoopers’ business recovery services unit to try to accelerate the turnaround strategy.

“These efforts have yielded mixed results,” said Kieftenbeld, before noting that in the first quarter of 2023, Amyris posted a year-over-year decline of 3% in revenues. The interim CEO also noted that two of the company’s major business segments—technology access and consumer products—still “continue to incur significant losses.” Each of the company’s consumer brands generate losses, while Kieftenbeld attributed unfavorable economic provisions in certain contracts.

As its troubles wore on, Amyris developed a strategy to refocus its business away from the consumer brands segment, shutting some of the brands down and, in July, hiring Intrepid Investment Bankers to market the company’s consumer brands for sale.

The company also reached agreements in recent months with its secured lenders that addressed existing defaults and provided Amyris with new loans from Foris and some of its affiliates. Amyris has also engaged with a group of convertible noteholders that have organized “in an effort to work cooperatively towards a consensual restructuring,” said Kieftenbeld.

The DIP and Chapter 11 case

Now under Chapter 11 protection, Kieftenbeld said the company will continue to market its consumer brands for sale and attempt to reposition the Amyris business on its historical core competencies—research, development and commercialization of sustainable biological compounds.

To fund itself during the bankruptcy, Amyris secured a commitment from Foris for USD 190m in DIP financing. Under milestone provisions built into the DIP, the company intends to use the first 35 days of its Chapter 11 case to try to negotiate with its key financial stakeholders for a consensual plan of reorganization that would streamline its balance sheet while allowing the continued pursuit of a buyer for the consumer brands division.

If no such comprehensive restructuring deal emerges, however, the company’s DIP calls for a toggle to a sale of substantially all of Amyris’s assets.

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