On the brink of bankruptcy, Probex Corp. said this month that it has failed to obtain a key financial instrument for its proposed used lubricant reprocessing facility in Wellsville, Ohio, and that the chances of the project moving forward havebeen reduced.
In a Feb. 5 news release, the Addison, Texas, company also stated that its financial predicament has likely doomed its other major project, a joint venture to build a reprocessing plant in France.
Officials said Probex is trying to restructure or extend the due date for $26.4 million in debt scheduled to be paid Feb. 28. Unless it succeeds or receives funding from outside sources, the company may file for Chapter 11 bankruptcy protection.
Obviously were in a challenging position right now, said John E. Fahey, vice president for industry sales and marketing. Were continuing to work forward to try to pull this together.
Since its founding seven years ago, Probex has focused on constructing a plant to reprocess used lubricants into base oil, fuel oil and asphalt flux. The company contends that its patented ProTerra technology yields higher quality base oils than standard reprocessing techniques and that its products will perform on par with virgin base oils. While working to bring that plan to fruition, Probexs main business has been to collect used motor oil, which it sells mostly for industrial fuel.
The Wellsville project, which was announced two years ago, calls for a plant that would process up to 183,000 metric tons of lubricants annually. Probex has cleared most of the major hurdles but has not yet obtained the $100 million in financing needed to pay for the project.
As part of the effort to obtain financing, the company had asked Swiss Re Group to renew a technology and market risk facility aimed at protecting potential lenders from risks associated with funding construction and start-up. Swiss Re had previously issued a facility but it expired in October. In its Feb. 5 news release, Probex said Swiss Re has decided not to issue a new facility.
Without this commitment, management believes that the probability of its obtaining financing for its Wellsville, Ohio, facility has been reduced, the news release said.
The French project, announced in December, has been jeopardized by Probexs financial straits. The joint venture, entered with two subsidiaries of an unnamed European company, called for Probex to make an initial investment of $159,000 and to contribute $1.9 million by the time the plant opened.
The Company does not have enough funds to meet its obligations under the joint venture agreements and currently does not anticipate that it will be able to meet its obligations under these agreements in the future, the news release said. Plans called for the French plant to have capacity to reprocess up to 120,000 metric tons per year.
Probex also advised that it has asked to withdraw registration of 16.9 million shares of common stock that it had intended to sell to Fusion Capital. Given its current condition, Probex cannot meet financial obligations required by Fusion for the sale.
Probex also said it may lose its listing on the American Stock Exchange. After reviewing the companys most recent annual report, the exchange informed Probex that it no longer met some conditions for listing. The exchange gave the company the opportunity to file a plan by early March laying out how it would return to compliance within 18 months. Probex said it has not decided whether to file a plan.
Probexs stock has lost more than 90 percent of its value since the beginning of the year, falling from 65 cents per share Jan. 2 to 6 cents per share yesterday.