Government Intervention: Dow Chemical Ordered to Keep German Plant Operational

January 16, Specialized Plastics Vision learned that despite ongoing bankruptcy proceedings and a shortage of liquidity, Domo Chemicals' production site in Germany has been ordered to continue operations. This directive was issued by the authorities in Saxony-Anhalt, who stated that a safe shutdown of the Leuna production site is not possible given the current weather conditions.

To prevent harm to the public and the environment, the state government ordered the activation of a substitute operation called Ersatzvornahme to avert various risks that could arise from a disorderly shutdown of production lines.

"The state government's approval for the plant to maintain low-level production until further notice is very positive news," said Lucas F. Flöther, partner at Flöther & Wissing and court-appointed interim insolvency administrator. "How the subsequent insolvency proceedings will unfold remains to be seen. However, what is clear is that we have gained valuable time to assess whether the plant has the potential for long-term stable operations and what conditions need to be met to achieve this."

The bankruptcy administrator's proposed solutions include introducing a new operator. If this plan materializes, the state government may terminate the substitute performance measures, helping the company to redefine its long-term development blueprint.

Three German subsidiaries of the DOMO Chemicals Group filed for insolvency on December 25. Previously, the company had decided to shut down its plants due to insufficient liquidity to pay suppliers, leading to a further deterioration of its operational status last week. On January 8, negotiations for transitional financing between the company, its creditors, and major shareholders collapsed. The following day, Sven Schulze, the Minister of Economic Affairs of Saxony-Anhalt, convened all relevant creditors and investors at the Leuna site for further consultations in an attempt to find a solution. As the parties failed to reach an agreement, the state government ultimately initiated substitute performance measures.

Meanwhile, the court-appointed insolvency administrator revealed that the German Federal Employment Agency has approved advance payments of insolvency benefits for approximately 585 employees, meaning their salaries can be paid on time until at least the end of March. This policy covers three insolvent subsidiaries of Domo Chemicals, and production work at the Premnitz site can continue.