Searles Valley Minerals Files Chapter 11, Secures $40M for Sale

Searles Valley Minerals Inc., a 113-year-old critical-minerals producer that extracts soda ash, borates, boric acid, sodium sulfate, and salt from the dry lakebed at Searles Lake in Trona, California, entered chapter 11 to run a court-supervised sale of substantially all of its assets. The company filed for bankruptcy alongside two affiliates and asked the court to approve a Section 363 going-concern sale that would move the Searles Lake mining complex, the Trona Railway short-line, and a regulated water utility to a new owner. The voluntary petitions were filed on June 15, 2026 in the U.S. Bankruptcy Court for the District of Delaware, with the lead case docketed as 26-10966 before Judge Brendan Linehan Shannon.

The case converts a roughly two-year out-of-court marketing effort into an in-court auction on a compressed schedule. The court approved bidding procedures on July 7, 2026, setting bids due August 6, an auction on August 13, and a sale hearing on August 26, 2026. No stalking-horse buyer is locked in, and the asset purchase agreement on file is a blank auction-draft form. To carry operations through the sale, the debtors secured roughly $40 million in combined liquidity — a $20 million junior debtor-in-possession loan from the parent and a $20 million unsecured liquidity advance from TATA Chemicals North America, a soda ash supplier.

Debtor	Searles Valley Minerals Inc. (3 jointly administered entities)
Court	U.S. Bankruptcy Court, District of Delaware
Case Number	26-10966
Petition Date	June 15, 2026
Judge	Hon. Brendan Linehan Shannon
DIP Facility	$20M junior parent DIP from Karnavati Holdings ($7.5M interim), maturing December 1, 2026, alongside a $20M TATA Chemicals supplier advance
Claims Agent	Stretto, Inc.

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Earthquake Damage and Soda Ash Oversupply

The first-day declaration of Adrian Frankum, the company's chief restructuring officer from Ankura Consulting Group, traces the distress to a combination of physical damage and market deterioration. The 2019 Ridgecrest earthquakes damaged the company's extraction operations and left production at roughly 50 percent of pre-earthquake levels, with about $50 million in repair costs and lost revenue. Searles Valley Minerals extracts brine from the Searles Lake lakebed using a solution-mining process and historically operated three processing plants producing borates, soda ash, and boric acid.

On top of the operational damage, the company faced a global soda ash oversupply driven in part by synthetic soda ash production from China, along with rising environmental-compliance, chemical, and utility costs. Overland Park, Kansas-based Searles Valley Minerals cited both the earthquake damage and low-cost competition as the drivers behind the filing. By early 2026 the company was operating at a loss of more than $5 million per month.

In February 2026 the company laid off approximately 240 employees and independent contractors, around 46 percent of its prior workforce, leaving roughly 279 full-time and one part-time employee as of the petition date. The first-day declaration states the layoffs were a cost-cutting measure that preceded, rather than averted, the chapter 11 filing; United Steelworkers Local 13214 placed the filing in the broader context of strain across the soda ash industry's workforce.

Prepetition Marketing and the Path to a Court-Supervised Sale

The sale process did not begin in bankruptcy. Searles Valley Minerals and its parent, Karnavati Holdings, Inc., engaged Lazard in February 2024 to evaluate and market the assets, and a formal sale process launched in August 2025 that contacted more than 140 parties, roughly 50 of which executed non-disclosure agreements. By April 2026 the company concluded that an out-of-court transaction was not viable given the company's legacy liabilities and prospective buyers' preference for acquiring the assets through a court-supervised process free of those liabilities.

That conclusion set up the chapter 11 filing as a sale vehicle rather than a reorganization. The debtors structured the case around a Section 363 auction backed by interim financing, using the prepetition outreach to more than 140 parties as the basis for the in-court marketing period. The court-supervised sale covers the company's full critical-minerals platform, which the debtors intend to sell as a going concern.

The corporate structure places the operating company beneath two layers of foreign ownership. Searles Valley Minerals is a Delaware corporation wholly owned by Karnavati Holdings, which is in turn wholly owned by Nirma, an Indian conglomerate. Two affiliated debtors sit directly beneath the operating company: Trona Railway Company LLC, a private short-line railway connecting the company's facilities to the Union Pacific main line, and Searles Domestic Water Company LLC, a regulated water utility serving approximately 760 residential and commercial customers in the Searles Lake area.

Capital Structure and HSBC First-Lien Facilities

Searles Valley Minerals entered chapter 11 with roughly $220.7 million of funded debt, split between secured bank facilities and unsecured parent loans. The secured debt consists of three first-lien facilities with HSBC Bank USA, N.A.: a demand-line revolver of about $47.4 million priced at the 8.00 percent prime rate or SOFR plus 2.25 percent, a receivables facility of about $26.0 million at SOFR plus 2.25 percent on a pari passu first-lien basis, and a letter-of-credit sublimit of about $12.1 million. The HSBC liens cover substantially all of the company's personal property, and the demand-line obligations are guaranteed by ultimate parent Nirma.

The largest single claim is unsecured and held inside the corporate family. Karnavati Holdings holds approximately $135.2 million in unsecured parent loans, with the 2026 tranche priced at SOFR plus 2.25 percent. Because the parent debt is unsecured and the HSBC facilities hold first liens on substantially all assets, the capital structure places the bank group ahead of the equity sponsor's own loans in any recovery waterfall from the sale.

Parent DIP Financing and the TATA Supplier Advance

The debtors are funding the case through two parallel facilities rather than a single DIP loan. The centerpiece is a $20 million new-money junior DIP term loan from Karnavati Holdings, structured with superpriority claims but no priming liens, which the DIP and cash collateral motion describes as the Parent Junior DIP Facility. It carries a $7.5 million interim limit, matures December 1, 2026, and includes a $50,000 wind-down amount in the carve-out triggered by a carve-out trigger notice following an event of default and acceleration. The budget covenants permit a 20 percent variance over any rolling two-week period, with weekly reconciliation and cash-flow reporting due each Thursday by noon New York time.

Running alongside the DIP is a $20 million unsecured liquidity advance from TATA Chemicals North America Inc., a soda ash supplier, guaranteed by the company's non-debtor indirect parent. The supplier advance and the DIP together supply the roughly $40 million of liquidity the debtors say they need to operate through the sale; cash collateral, DIP proceeds, and the supplier advance may be used only for budgeted expenditures subject to the permitted variances. The court entered an interim DIP order on June 17, 2026, with a final hearing to follow. The DIP motion also sets a milestone schedule tying the financing to entry of the final DIP order, the bid procedures order, receipt of going-concern bids, the auction, the sale hearing, sale consummation, and the filing, confirmation, and effectiveness of a chapter 11 plan.

Section 363 Sale and Open Bidding Procedures

The debtors sought approval of bidding procedures and a going-concern sale of substantially all assets — the Searles Lake mining and processing complex, the Trona Railway short-line, and the water utility operations — free and clear of liens, claims, and interests under Section 363(f). The bid protections are constrained: any break-up fee and expense reimbursement for a stalking-horse bidder are capped at 3 percent of the cash portion of the purchase price, and competing bids require a good-faith deposit of 10 percent of the cash consideration, with no deposit required for credit bids by the DIP or prepetition lenders. The outside backup-bid date runs 60 calendar days after entry of the sale order.

The court entered an order approving the bidding procedures on July 7, 2026. The order retains the August 6, 2026 bid deadline and the August 13, 2026 auction at Skadden's offices at One Manhattan West in New York, while setting the sale hearing for August 26, 2026 at 1:30 p.m. ET. It authorizes the debtors to designate one or more stalking-horse bidders, with any break-up fee or expense reimbursement subject to a separate bid-protections order, and it deems the DIP lender and the prepetition secured lender qualified bidders eligible to credit bid under Section 363(k), giving the HSBC group and the parent a path to acquire the assets without committing new cash.

As of early July, the sale remained an open process with no buyer identified. The debtors had not designated a stalking horse. On June 27, 2026 they filed a proposed form of asset purchase agreement that lists the buyer as "[●]" with a drafting note that the buyer structure remains to be discussed and states no purchase price — a baseline template circulated to bidders rather than an executed deal. The sale-order legal findings the debtors are requesting, including 363(f) free-and-clear treatment, 363(k) credit-bid rights, 363(m) good-faith-purchaser protection, and the absence of successor liability, remain in requested status.

On July 10, the debtors filed a proposed schedule of contracts subject to potential assumption and assignment in the sale. Inclusion on the schedule does not guarantee that any given contract will be assumed or assigned, and counterparties receive a 14-day cure-objection window after service of the notice. Any objection tied to the identity of the successful bidder or to adequate assurance of future performance is due by August 18, 2026 at 4:00 p.m. ET.

Utility Deposits and the Committee's Financing Fight

The first contested matter on the docket was an adequate-assurance dispute with two utilities. Constellation NewEnergy – Gas Division, LLC and Southern California Edison Company objected to the debtors' proposed two-week segregated utility deposit account, arguing that it is not a recognized form of adequate assurance under Section 366(c)(1) and is inadequate given monthly billing cycles and roughly 60 days of service exposure. Constellation demanded a cash deposit of about $2.1 million and Southern California Edison demanded about $3.0 million, a combined ask of roughly $5.1 million against the debtors' proposed account structure. The court resolved the dispute with a July 8 final order approving an adequate-assurance framework built around a Utility Deposit Account of approximately $2.625 million — well below the utilities' combined $5.1 million ask — with procedures for additional-assurance requests and a requirement that account adjustments over $50,000 receive two business days' notice to committee counsel.

The same week, the court converted several other first-day interim orders to final relief, including cash management, employee obligations, and critical-vendor payments, all entered July 8, 2026. Separately, the debtors obtained an order modifying the automatic stay to permit the continuation of state-court water-rights litigation, with a final hearing noticed on the water-rights matter. Active engagement from major counterparties — including HSBC as prepetition agent, Union Pacific Railroad, TATA Chemicals, and several rail and equipment lessors — has appeared on the docket through notices of appearance. The U.S. Trustee appointed an official committee of unsecured creditors on June 26, 2026, seating seven members including Mountain Coal Co., L.L.C., Bakersfield Machine Co., Amergin Rail 2023-1, LLC, and GATX Corp.

A day later, on July 9, the committee filed a sealed objection to the debtors' DIP and cash-collateral motion and to the separate soda-ash supply-and-liquidity financing motion covering the TATA Chemicals advance. The filing is sealed, so the docket does not disclose the committee's specific arguments, but it leaves final approval of both financing arrangements as the case's most immediate contested issue heading into the August sale process.

On July 11, the committee escalated the dispute, noticing a Rule 30(b)(6) deposition of Searles Valley Minerals tied to the DIP and supply-liquidity financing motions. The notice lists the prepetition sale effort, the DIP negotiations and terms, board and independent-committee matters, the company's dealings with Nirma and Karnavati Holdings, unencumbered assets, and the DIP budget as deposition topics. It does not set a date, time, or location for the deposition.

Professional Retentions and the Lazard Fee Structure

The debtors assembled a restructuring roster led by Skadden, Arps, Slate, Meagher & Flom LLP, which filed a retention application disclosing a $750,000 advance-payment retainer and hourly rates ranging from about $795 to $2,850 effective May 1, 2026. Pachulski Stang Ziehl & Jones LLP serves as Delaware co-counsel under a $250,000 retainer with rates from about $625 to $2,695 per hour.

Lazard Frères & Co. LLC continues as investment banker under a Section 328 application with a layered fee structure. The Lazard retention provides for a $150,000 monthly fee and a $5,000,000 restructuring fee, or alternatively a sale transaction fee of $3,000,000 plus 3.5 percent of enterprise value between $200 million and $300 million and 5.0 percent of value above $300 million, with monthly fees credited after the sixth month. Ankura Consulting Group provides the financial-advisory and CRO services through declarant Adrian Frankum, and Stretto, Inc. serves as claims and noticing agent under a $15,000 retainer.

Key Timeline

Date	Event
February 2024	Lazard engaged to market the assets
August 2025	Formal prepetition sale process launched; 140+ parties contacted
February 2026	Approximately 240 layoffs, around 46% of the workforce
April 2026	Out-of-court transaction deemed unviable
June 15, 2026	chapter 11 petitions filed; first-day hearing held
June 16, 2026	Joint administration and interim first-day orders entered
June 17, 2026	Interim DIP order entered
June 26, 2026	Official committee of unsecured creditors appointed
June 27, 2026	Proposed form of asset purchase agreement filed
July 7, 2026	Court approves bidding procedures; sale hearing set for August 26
July 8, 2026	Final orders entered on utility services, cash management, employee obligations, and critical-vendor payments
July 9, 2026	Committee files sealed objection to DIP and supply-liquidity financing motions
July 10, 2026	Proposed contract assumption/assignment schedule filed
July 11, 2026	Committee notices 30(b)(6) deposition of SVM on financing motions
August 6, 2026	Bid deadline
August 13, 2026	Auction (if needed)
August 26, 2026	Sale hearing
December 1, 2026	DIP maturity

Frequently Asked Questions

Who is the claims agent for Searles Valley Minerals?

Stretto, Inc. serves as the claims and noticing agent under a $15,000 retainer and a preferred-rate structure disclosed in its retention application. Stretto maintains the claims register and handles noticing for the jointly administered cases.

What assets are being sold in the Searles Valley Minerals bankruptcy?

The Section 363 sale covers substantially all of the debtors' assets as a going concern: the Searles Lake mining and processing complex producing soda ash, borates, boric acid, sodium sulfate, and salt; the Trona Railway short-line; and the Searles Domestic Water utility serving about 760 customers. The bidding procedures motion governs how those assets are marketed and sold.

Who is providing debtor-in-possession financing?

Karnavati Holdings, Inc., the company's direct parent, is providing a $20 million junior DIP facility with a $7.5 million interim limit and a December 1, 2026 maturity. A separate $20 million unsecured liquidity advance from TATA Chemicals North America runs alongside the DIP, for roughly $40 million in combined liquidity.

Is there a stalking-horse bidder?

No stalking horse has been designated. The July 7, 2026 bidding procedures order authorizes the debtors to name one or more stalking-horse bidders later, and the asset purchase agreement filed on June 27, 2026 remains a blank auction-draft form with no named buyer and no stated purchase price.

Ask our AI chat to review the Searles Valley Minerals docket, including the key filings, orders, and deadlines behind this case. For broader docket monitoring and restructuring-research access, see ElevenFlo pricing.

For related coverage of distressed mineral and commodity producers selling through court-supervised processes, see Aleon Metals' $187.5M credit bid for a critical-minerals facility, the Crucible Industries steel-business sale, and Heritage Coal's 363 sales and liquidating plan.