Court approves VeraSun operating loans during restructuring
A few VeraSun ethanol plants will remain operating while the company restructures after filing for bankruptcy, according to a ruling this week. But, that doesn't mean all corn contracts will be honored, according to a VeraSun report. Many contracts at plants that will be idled through the first of next year will be rejected.
The U.S. Bankruptcy Court overseeing the ethanol giant's restructuring proceedings has granted final approval for debtor-in-possession (DIP) financing to the tune of almost $200 million. About half of that amount will go toward incremental financing to keep production going at VeraSun ethanol plants in Aurora, South Dakota, and Fort Dodge, Charles City and Hartley, Iowa, according to a company report. The remaining $103 million will be used to "refinance prepetition loans that had been made by the noteholders who participated in the DIP financing," company officials say. The DIP financing will reach maturity in November of next year.
"The DIP financing will allow us to focus on running the business while undergoing the restructuring process as part of addressing VeraSun's long-term future," says VeraSun CEO Don Endres in a company report.
An additional $34.5 million in DIP financing from two lender groups -- made up of previous interim loans and incremental operating capital -- was allocated to keep other VeraSun plants in operation in:
- Central City, Nebraska
- Ord, Nebraska
- Dyersville, Iowa
- Albert City, Iowa
- Hankinson, North Dakota
- Woodbury, Michigan
- Albion, Nebraska
- Linden, Indiana
- Bloomingburg, Ohio
"The work force at these production facilities will be retained during this period, but VeraSun does not expect the facilities to produce ethanol until permanent financing is secured," according to a VeraSun report.
Even though these plants will keep producing ethanol, that doesn't mean every corn contract will be honored. Until final restructuring has been approved, VeraSun can reject "certain" corn contracts at a few of the plants affected by the DIP financing.
"The Court approved the company's request to reject certain corn contracts for delivery through December at the idled Welcome and Janesville (Minnesota) facilities. The company also intends to reject corn contracts for delivery through January 31, 2009, at those facilities," according to a company report. "In addition, because the company does not expect to operate the production facilities located in Central City, Ord, Dyersville, Albert City, Hankinson and Woodbury through January 15, 2009, the company informed the Court that it intends to reject contracts for delivery of corn scheduled at these facilities during this period.
"This action responds to a number of requests by producers to gain certainty on the status of their corn contracts and will allow them to move forward to remarket their corn," the company statement adds.