Late Breaking Developments in the Ascend Elements Bankruptcy
There is some late breaking activity in the Ascend Elements bankruptcy worth covering, and it all revolves around the partially constructed battery recycling facility in Hopkinsville, Kentucky.
Turner-Kokosing Joint Venture (TKJV) won the auction for the Hopkinsville facility. TKJV is the construction company that actually built the facility for Ascend Elements, but they were never fully paid for the work they did.
What makes this more interesting is that Ascend Elements, who are the debtors in this bankruptcy, invited American Battery Technology Company (ABAT) to participate in the auction. ABAT showed up, raised their offer during the bidding, and still lost to TKJV.
That leaves ABAT as the backup bidder, meaning they are next in line if TKJV cannot close the deal. Ryan Melsert, CEO of ABAT, filed a court declaration explaining why ABAT should be allowed to be the winning bidder not the backup bidder.
At the core of Ryan’s argument is how the federal government handles assets that were built with grant money. Here is what he is working with:
The Department of Energy funded Ascend’s construction of the Hopkinsville facility through a grant program
ABAT separately holds a DOE grant from that same program, sized for a facility with exactly the same capacity as Hopkinsville
The filing lists the grant at $150 million, though federal sites have the award at $144 million with ABAT’s sub-contractor Argonne National Lab getting around $6.4 Million.
Federal regulations provide two pathways when a DOE-funded asset changes hands
The Continued Use Pathway allows the asset to transfer to another party operating under the same grant program without any financial penalty
The Disposition Pathway requires the government to be compensated for its share of the asset’s value before anything else happens
Because ABAT’s grant comes from the same program as Ascend’s, Ryan argues ABAT can take ownership through the Continued Use Pathway cleanly. Any other buyer is looking at a more complicated and expensive conversation with the federal government
United Electric Company’s objection is where this gets interesting. United Electric Company is an electrical subcontractor that TKJV brought in to do work on the facility, and they were never paid either. They have an $18.7 million lien on the property, meaning they have a legal claim against the asset for the money they are owed. They are one of several unpaid contractors in the same position, and the total amount owed to that group exceeds $120 million.
United Electric Company worked out an agreement with TKJV and dropped their objection to that sale. But they are still firmly objecting to any sale that involves ABAT. The specific protections they are asking for tell you quite a bit about what they are worried about.
Their claims must attach to any money generated by an ABAT transaction
They will not be bound by whatever value ABAT assigned to the property during the auction
They want to see the full terms of ABAT’s purchase agreement before anything moves forward
When you step back and look at the full picture, there is a fairly logical path that emerges here. TKJV is a construction company with no interest in operating a battery recycling facility long term. What they want is to recover the money they are owed for building it.
ABAT has a DOE grant that fits this specific facility and lost the auction. A private sale from TKJV to ABAT after the bankruptcy closes takes care of both parties. TKJV gets paid, ABAT gets the facility and finishes construction using their grant money, and the DOE’s requirements under the Continued Use Pathway are satisfied, the site used $216 million of a $316 Million cash share grant so ABAT’s grant could actually pay to finish it.
There is another possible outcome worth considering though, and this is what Ryan’s filling is all about.
A bankruptcy judge looks at more than just who bid the most money. If the DOE signals that the Continued Use Pathway is the preferred resolution, and if Ryan Melsert’s argument that ABAT is the cleaner buyer gains any traction with the court, the judge could decide that awarding the sale to ABAT makes more sense for the estate overall.
The big caveat is that ABAT would need to satisfy the claims of the major creditors, and TKJV sits at the top of that list. If ABAT can put together a deal that makes TKJV whole, or reasonably close to it, the court would have a real argument in front of it.
The contractors who are still owed money, represented in part by United Electric Company and their $120 million in collective claims, are the ones left trying to recover whatever is available after any of these transactions get structured.
Whether it ends up being a private sale from TKJV to ABAT, or the court decides ABAT is the better buyer outright, the unpaid contractors below TKJV are looking at a barren landscape when it comes to getting reimbursed.
If there is anymore filings that drop I will do another update.
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