Cereplast Inc. on Thursday said that a group of institutional investors had agreed to buy $12.5 million worth of 7-percent senior subordinated convertible notes

The El Segundo maker of bio-based, compostable plastics said the proceeds will be used for working capital as the company expands.

“We are at an inflection point of a growing need for bioplastics worldwide,” Chief Executive Frederic Scheer said in a statement. “Demand is being driven by legislation for bio-based alternatives to petroleum-based plastics, as well as the rising price of commodities. Not only do we expect continued growth to come from the European marketplace, but new legislation in India, Brazil and other countries have introduced a tremendous opportunity for Cereplast bioplastics in those regions and beyond.”

The notes will be due June 1, 2016, and the company will pay interest on them twice a year. They can be converted to Cereplast stock equivalent to about $5.80 per share.

Lazard Capital Markets LLC was as lead placement agent for the offering with Roth Capital Partners LLC and Ardour Capital Investments LLC serving as co-placement agents.

Shares closed down 26 cents, or 5 percent, to $4.80 on the Nasdaq.