[Exclusive] 450 Billion Won Korean Investment at Risk as Canadian PE Moves to Acquire US Ascend for $99.2 Million

Canadian PE Firm Kinterra Capital Steps Up as Stalking Horse Bidder
Sole Bidder Raises Offer, Solidifying Acquisition
Creditor-Focused Process Leaves Korean Investors’ Fund Recovery Uncertain

Canadian private equity fund Kinterra Capital has announced its intention to acquire Ascend Elements, a U.S.-based battery recycling company that has filed for bankruptcy protection, for $99.2 million (approximately KRW 149.8 billion). Since there are no other bidders in the race, it appears likely that Kinterra will succeed in acquiring the company. As compensation is expected to be focused on the senior creditors, the prospects for Korean equity investors—such as SK ecoplant, SKS PE, and SeAH Holdings—to recover their funds have become even dimmer.

According to sources in the investment banking (IB) industry on May 20, the U.S. Federal Bankruptcy Court for the Southern District of Texas has approved Kinterra’s $99.2 million stalking horse bid for Ascend. A stalking horse is a process whereby a seller facing restructuring or bankruptcy enters into a conditional sale agreement with an initial bidder to set a starting point for a public competitive auction. If another bidder makes a better offer, the original stalking horse is compensated. In this case, Kinterra was set to receive $3.5 million if a new bidder emerged.

Bidding was open until May 9, but no other potential acquirers came forward, effectively making Kinterra’s acquisition of Ascend highly probable. Kinterra established a special purpose company (SPC) called Bluegrass for the asset acquisition. To solidify its exclusive acquisition plan, Kinterra increased its original offer from $80 million to $99.2 million. The minimum increment for additional bids was also raised from $3.2 million (about KRW 3.8 billion) to $4 million (about KRW 6 billion). On May 21, at 9:00 a.m. local time, the court will hold a hearing on the asset sale.

Kinterra is believed to have formed an alliance with some of the creditors. According to the initial Asset Purchase Agreement (APA), the acquisition price is structured as a credit bid. This means that instead of cash, the amount is offset against the seller’s outstanding debts. The included debts are: ▲ all unpaid obligations under debtor-in-possession (DIP) financing ▲ all unpaid obligations under the senior secured convertible bonds and bonds with warrants purchase agreements ▲ $30 million (about KRW 45.3 billion) of unpaid obligations under the subordinated secured convertible bonds purchase agreement. Bluegrass is also the lender of the DIP financing, which is given top priority. If Kinterra’s acquisition is finalized, the creditors included in this list will be able to receive equity in the new company in exchange for their existing debt.

Creditors not included in Kinterra’s plan have objected. For example, Turner-Kokosing JV—a joint venture of Kokosing Industrial—argued that the DIP financing was not necessary to prevent harm to Ascend, and that Kinterra’s plan was designed to benefit only a select group of creditors, urging that the entire DIP financing be dismissed. They also claimed that mechanisms such as termination fees set by Kinterra were a calculated deception to secure the acquisition. In response, senior creditors countered by stating, “The objecting parties have not proposed any funding solutions,” and added, “The senior creditor group is simply requesting protective measures in exchange for using cash by mutual agreement for the company’s survival.”

Under these circumstances, it is expected that Korean equity investors such as SK ecoplant, SKS PE, SeAH Holdings, Mirae Asset Capital, and Shinhan GIB will face even greater difficulty in recovering their funds. According to Ascend’s bankruptcy filing, the company’s debts range from $500 million to $1 billion (KRW 755.2 billion to KRW 1.5103 trillion), meaning that even after Kinterra’s $99.2 million acquisition, the debts will not be fully repaid. According to Chapter 11 of the U.S. Bankruptcy Code, equity holders and shareholders can only recover funds after all creditors have been paid in full. However, a representative from one investment firm commented, “We are sharing relevant information,” and added, “Since each investor’s conditions differ, it is difficult to assume the proceedings will be entirely creditor-focused. We will continue to monitor the process and discuss the matter as it develops.”

This content was produced with the assistance of AI translation services.