CHICAGO – Assets of the shuttered, half-built Mamtek US Inc. plant in Moberly, Missouri were auctioned Wednesday to help creditors – including holders of $39 million of defaulted revenue bonds – recoup some of their losses.

Officials did not offer a tally on the sale Wednesday but the trustee UMB Bank was expected to post a bondholder notice later this week or next week on the auction results.

UMB ordered the auction after it could not find a buyer to take over the plant. The city handed over control of the project to UMB after Mamtek defaulted on payments to the city last year. Moberly in turn reneged on its appropriation pledge that supported the debt. The asset liquidation company Heritage Global Partners managed the auction.

The bonds were sold in 2010 through the city’s economic development authority to help finance a sucralose manufacturing plant being built by a subsidiary of the Chinese company Mamtek International. Standard & Poor’s in March downgraded to D its rating on the issue. The city lost its investment grade rating for its decision not to honor its appropriation pledge.

Local and state prosecutors and federal regulators recently filed civil and criminal complaints  alleging theft, fraud and securities violations against Mamtek’s former head Bruce Cole.

The trustee and other creditors forced the company into involuntary bankruptcy and various lawsuits and other legal claims have been lodged against Cole and the underwriter Morgan Keegan & Co. and bond counsel Armstrong Teasdale LLP.

The charges leveled by local, state and federal authorities accuse Cole of pocketing some of the proceeds to stave off the foreclosure of his Beverly Hills home and lying to the city and investors about the nature, timing and viability of the project. Cole faces both fines and possible jail time if convicted.

Bondholders’ ultimate recovery remains unclear as bankruptcy trustee Bruce Strauss is also analyzing possible claims against former Mamtek officers. Strauss has already filed a lawsuit against Cole for breach of fiduciary duty.

State officials who had reviewed the project and awarded $17 million in subsidies to it came under fire during legislative hearings earlier this year on the failed project. A recent state auditor’s report also took the department to task for its lack of due diligence on the company’s financial statements and for failing to followup on questions raised about the company’s operation of a plant in China. The company never received the state aid.

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