DISTRESSED DAILY: For CalPlant, It’s Not Easy Being Green

A California sustainability project gone astray is bringing a rare mash-up of green bonds and financial distress to the often staid world of municipal finance.

CalPlant I LLC, which has been working for years to produce a special variety of fiberboard made from a rice byproduct, filed for bankruptcy on Tuesday. In tow are more than $300 million of tax-exempt green bonds issued by the California Pollution Control Financing Authority beginning in 2017.

The market for green bonds has seen explosive growth in recent years, setting the scene for more environmentally-friendly defaults in the years to come. As CalPlant’s ...