Specialties maker Vertellus files for bankruptcy

Under the weight of high debt and slumping markets, Vertellus Specialties has filed for Chapter 11 bankruptcy protection. Lenders are ready to take over the firm for $454 million if other bidders don’t materialize over the summer.

The private equity firms Arsenal Capital and Wind Point Partners built Vertellus over the past decade with pieces from Reilly Industries, Cambrex, and other firms.

The company, which has nearly $700 million in annual revenues, is the world’s largest producer of pyridines, picolines, and the insect repellant N,N-diethyl-meta-toluamide (DEET). The company also has strong positions in vitamin B-3 as well as castor oil and citrate derivatives.

Recent acquisitions include purchases of Dow Chemical’s sodium borohydride business and the British fine chemicals maker Pentagon Chemicals. Vertellus also acquired a pyridine plant in China and, earlier this year, completed a DEET expansion in Greensboro, N.C.

In explaining the bankruptcy in court documents, the company says it “faced a slowing of growth rates for its pyridine and picoline products, coupled with significant increases in global capacity and production, primarily from Chinese manufacturers.” The company also blames a high debt load as well as environmental and pension burdens.

One of the main uses of pyridine is making the herbicide paraquat. Crop protection chemicals of all kinds have been under pressure from slumping farm commodity prices.

The bankruptcy wasn’t unexpected. In April, Vertellus missed an interest payment on a loan. In lowering the company’s credit rating at the time, the ratings agency Moody’s foretold of a possible “sale of some or all of the business.”

The bankruptcy court will oversee a bidding process over the next couple of months to see if the banks’ opening offer stands or if higher bidders emerge. Vertellus is getting $110 million in financing to run day-to-day operations.

The company’s Elma, Wash.-based sodium borohydride business, acquired from Dow, is not included in the bankruptcy. Wind Point will continue to own and operate it under the name Vertellus Performance Chemicals.