Cereplast, a maker of biodegradable plastics based in El Segundo, announced Tuesday that it increased its allowance for bad debts by $1.7 million even as it assured investors it will collect all outstanding receivables.

The company said its two largest debtors owe $7.6 million and $6.1 million respectively, representing about 65 percent of outstanding invoices. The company said the customers will pay the monies owed by February.

In November, the company announced that the European debt crisis had affected its business because Euro Zone customers were holding onto their cash rather than paying their bills. About half of Cereplast’s business comes from Italy, where a January 2010 law banned petroleum-based plastic bags, creating a demand for Cereplast’s alternative plant-based plastic.

By mid-day, shares of Cereplast were trading at 99 cents, an increase of 2 cents, on the Nasdaq.