'All That Investment, But... Ascend Elements Files for Bankruptcy; Korean Investors Say "Let’s Wait and See"'

With the American battery recycling company Ascend Elements filing for bankruptcy protection, Korean investors such as SK ecoplant, SKS Private Equity, and SeAH Holdings are now facing heightened risks in recouping their investments. The investors have stated that they will monitor developments for now before deciding on a course of action.

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According to the investment banking (IB) industry on April 17, Ascend Elements filed for voluntary bankruptcy protection and corporate rehabilitation under Chapter 11 of the U.S. Federal Bankruptcy Code with the U.S. Southern District Federal Bankruptcy Court in Texas on April 9 (local time). According to fintech company Caplight, Ascend Elements recorded a corporate value of 1.6 billion dollars (approximately 2.2 trillion won) as of February 2024, following its Series D funding round, thus joining the ranks of unicorn companies (unlisted startups with a valuation of over 1 trillion won).

Ascend Elements' bankruptcy filing shows the company has between 1,000 and 5,000 creditors. In response to a question estimating the debtor’s available funds, Ascend Elements indicated that "funds are available for distribution to unsecured creditors." Estimated assets are in the range of 1 billion to 10 billion dollars (1.4765 trillion to 14.765 trillion won), while liabilities are somewhat lower, at between 500 million and 1 billion dollars (738.25 billion to 1.4765 trillion won).

Lynn Orsten, CEO of Ascend Elements, issued a statement to investors, clients, and employees via LinkedIn on April 10. CEO Orsten explained, "Efforts such as streamlining operations, reducing costs, and securing additional capital were not enough to overcome longstanding financial issues and unpaid debts," and added, "We have voluntarily initiated corporate rehabilitation to maximize stakeholder value." She emphasized the company’s technological strength and future potential, assuring that even during the proceedings, the Georgia plant will continue normal operations and that large-scale, long-term purchase agreements with key clients such as Trafigura will move forward as planned.

However, despite these efforts, there is a high likelihood that shareholders and equity investors will have difficulty recovering their investments in the worst-case scenario. This is because under Chapter 11 of the U.S. Federal Bankruptcy Code, all creditor debts must be paid off before lower-priority shareholders and equity investors can recover any funds.

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The problem is that most Korean investors are shareholders or equity investors. The Korean company with the largest stake among Korean investors is SKS Private Equity, which purchased 9,923,555 shares (worth approximately 131.6 billion won) from SK ecoplant in September 2024. SKS Private Equity holds a 5.9% stake through a special purpose company, Ascending Green Energy. SK ecoplant, which sold its shares to SKS Private Equity, still owns a 0.92% stake. According to the disclosure on the Financial Supervisory Service’s electronic disclosure system (DART), the acquisition cost was 8.67485 billion won.

Mirae Asset Capital and Shinhan GIB also participated in a 200 million dollar (294.48 billion won) Series C equity investment round in 2022, together with SK ecoplant and the Oman Investment Authority (OIA). Iron Grey, the investment arm of SeAH Holdings, also made an investment.

Several Korean investors have stated that, as the proceedings are still in their early stages, they plan to monitor developments before deciding on a response. One investor commented, "Since participating in the investment, we have maintained ongoing communication with Ascend Elements," and added, "It was confirmed that the rehabilitation process is underway to restructure existing debt and continue operations amid recent changes in market conditions." The investor continued, "We are continuously sharing relevant information with Ascend Elements and monitoring the situation, and we plan to review possible responses going forward."

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