HDPE bottle recycler Closed Loop Recycling has been forced into a pre-pack administration.
Resource Efficient Business understands that the company has been purchased by investment firm Euro Capital after appointing administrators last week.
The new owners of Closed Loop Recycling are brothers Afsal and Shabir Majid who also own Birmingham’s Euro Packaging, which manufacturers more than 3,000 packaging products including plastic bags and catering products.
An industry source said that the pre-pack administration enabled the Dagenham-based plant to survive along with the jobs of 130 employees, with the only other alternative being a closure and sale of its assets.
The source revealed that the company would have survived in its previous ownership structure if WRAP or the government could have provided temporary financial assistance.
Closed Loop Recycling ran out of cash as a result of the fall in the oil price that resulted in virgin polymer falling in value. This meant that recycled HDPE (rHDPE) became more expensive that the virgin product, and dairies and bottle manufacturers switched to virgin as a result.
But with prices for recycled plastics once again on the rise, Closed Loop Recycling would have continued as before if bridging finance could have been arranged.
The source said that the new owners will still face the challenge of convincing the dairy supply chain of the need to commit to buying rHDPE over virgin polymer until the cost equation favours the recycled material once again.
Resource Efficient Business understands that Foresight group, which invested in equity and loans in the company, and Closed Loop Recycling bank Allied Irish, will be the main losers as a result of the pre-pack administration.
However, some trade creditors may also lose cash as a result, but the effect isn’t expected to be as large as that on creditors when Eco Plastics also undertook a pre-pack administration.
At this stage, it also remains possible that current chief executive Chris Dow will remain with the company.