While attention was rightfully given to the devastation of western North Carolina and other areas following Hurricane Helene, a non-natural disaster was also occurring in the Southeast that appeared unrelated to the storm. Over the weekend, a chemical plant in Conyers, Georgia, exploded in a massive, war-zone-level explosion. The rising clouds of smoke could be seen for miles. The nearby stretch of I-20 was closed, 17,000 residents were evacuated and another 90,000 were ordered to shelter in place. That order was reinstated Tuesday morning after being briefly lifted when a change in the weather blew toxic clouds back over a populated area.

There are conflicting statements from the authorities regarding safety and air quality. According to local reports, residents are already showing symptoms such as shortness of breath, tightness of the lungs, cough and eye irritation. A law firm is investigating the matter and offering free consultations with affected residents. She advises a local news site that victims “may be entitled to compensation.”

But will the company that owns the facility still have cash left for victims of its negligence? A cursory look at the capital structure raises doubts.

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The explosion came from a facility owned by swimming pool and spa water treatment manufacturer BioLab, Inc., which is owned by private equity firm Centerbridge Partners. The plant has a long history of recent explosions, fires and workplace safety violations. Four years ago, a similar explosion at another facility in Georgia enveloped the area in a cloud of chlorine vapor, just a month after a major fire at a BioLab facility in Louisiana led to a nationwide shortage of pool products.

After the recent BioLab fire earlier this summer in Westlake, Louisiana, the US Chemical Safety Board found the company responsible for negligence and five separate safety violations that led to the fire. BioLab was fined a paltry $2,500, paid to local authorities, for the disruption caused by separate on-site accommodation.

Despite these repeated accidents, the Rockdale County Economic Development Authority in Conyers paid the company an undisclosed amount in tax breaks in 2019 for an expansion of the BioLab site.

BioLab says it took all necessary precautions in advance of this weekend's explosion. In a statement on OutlookSaid a spokesperson: “Over the years, our company has consistently made improvements to our facilities, policies and practices… We also conduct regular testing and evaluation of our fire protection systems based on industry standards, as well as inspections with the local fire department.”

But how all these incidents accumulate raises further questions. BioLab's private equity owners have also recently reaped huge dividends from the company, not through the company's profits but through the issuance of billions of dollars of debt and the recent sale of a partner company that produces automotive products produced and financed.

Translated into plain language, this means that unsecured creditors are likely to get nothing if the explosion destroys BioLab's chlorine plant and pushes the company into bankruptcy.

Just two and a half months ago, Centerbridge-owned parent company KIK announced that it would sell BioLab's sister company, which produces Prestone brand antifreeze, among other things, to chemical company Recochem for $850 million. A credit report on the deal said Centerbridge would use the proceeds from the sale to pay investors “significant dividends” and “slightly reduce its balance sheet debt,” adding that the deal would significantly reduce BioLab's debt 8.4 times would “increase” earnings before interest, taxes, depreciation and amortization. Based on S&P Global's ratings analysis, it appears that the $850 million sale was almost entirely funded by investors via the associated dividend.

This was the third or fourth time since BioLab's two explosions in 2020 that Centerbridge had increased the company's debt load to line its own pockets. In December 2020, BioLab took out a $775 million term loan to fund a dividend, then returned to the market the following month to take out an even larger loan. In December 2021, it issued another $170 million in “additional” term loan debt and then launched another $925 million loan sale in June to fund a dividend.

The BioLab bonanza is part of a broader – and quite dangerous – industry trend. Dividend recapitalizations, in which private equity firms take on debt to fund distributions, are back in force and on track to surpass 2021's record levels. Centerbridge has benefited greatly from this trend. Just last month, the company collected more than $250 million from the dividend return of a home health agency it co-owns.

What's really concerning about this trend is that interest rates were about 500 basis points higher than during the last dividend recap bonanza, which is the price that workers, customers and stakeholders of these companies must pay to service the debt resulting from these transactions is significantly higher – as is the risk that they will drive companies into insolvency.

At BioLab's latest monster dividend in June, ratings agency S&P Global estimated that the parent company would still make enough profit to meet its interest payments, but it backed up that confidence with a startling admission: It gave the unsecured debt a “recovery rating.” ” of “6,” which means “negligible (0%-10%; rounded estimate: 0%) recovery in the event of an outage.” Translated into plain language, this means that unsecured creditors are likely to get nothing if the explosion destroys BioLab's chlorine plant and pushes the company into bankruptcy. This includes the company's pension funds and any contractors, staffing agencies or suppliers to whom BioLab owes money – as well as anyone who seeks to sue BioLab for the damage caused by the series of toxic infernos, whether to the environment or otherwise .

Ironically, Centerbridge founder Mark Gallogly, a major Democratic donor who has given millions of dollars to Democratic politicians and committees over the years, is married to an environmental scientist and describes himself as a “climate activist.” The couple has donated well over $800,000 to Democrats this election cycle. Just a few months ago, Gallogly even appealed to viewers on CNBC to vote for Joe Biden because of climate change. (Gallogly retired as Centerbridge's chief executive in 2020, but still owns part of the company.)

Centerbridge did not respond to a request for comment Outlook.

Poisoning communities with toxic negligence and then using bankruptcy relief to avoid having to pay for it is such a common private equity playbook right now that Gallogly probably doesn't see the contradiction. Finally, Biden's best friend David Rubenstein's Carlyle Group left a far greater environmental disaster in its wake when a Philadelphia oil refinery it owned blew up in 2019 after Carlyle withdrew at least $600 million in dividends from the dilapidated facility and it had given up completely in bankruptcy the year before. (This cleanup is expected to cost well over a billion dollars, with most of it being borne by taxpayers in one way or another; the refinery also owed the Environmental Protection Agency hundreds of millions of dollars when it filed for bankruptcy.)

In a similar saga two years ago involving a sterilization plant just 26 miles from BioLab's pool products factory, the company exposed Sterigenics, co-owner of the private equity firm headed by the former Obama administration treasury secretary , Tim Geithner, knowingly released reports from area residents that his facilities in Georgia and Illinois were polluting his facilities in Georgia and Illinois with carcinogenic emissions while issuing billions of dollars in debt to pay dividends to investors. Although Sterigenics has not yet filed for bankruptcy protection, the company used the associated threat to settle lawsuits involving more than 870 residents who were sickened by its toxic fumes for about $400 million, a fairly paltry sum if Considering that the EPA compiled the residents of Sterigenics in the contaminated areas, cancer occurred nine times higher than the national average.

This bankruptcy game is a familiar strategy that Centerbridge could well resort to if lawsuits and federal penalties cause their chemical cash cow to go up in financial flames.