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Ethanol bleeding continues: VeraSun files for Chapter 11 bankruptcy

Agriculture.com Staff 11/03/2008 @ 10:11am

Officials with VeraSun Energy Corporation (VSE) announced late Friday that the company and 24 of its subsidiaries have filed for Chapter 11 bankruptcy protection.

Company leaders say the move is to "enhance liquidity while they reorganize," and is a result of "a series of events that led to a contraction in VeraSun's liquidity, impairing its ability to operate its business and invest in production facilities," according to a VeraSun report. Among these conditions are higher costs for securing corn supplies and hedging, as well as "historically unfavorable margins" in the corn and ethanol trades.

But, it's also more macroeconomic; Officials say a tighter credit marketplace is also hacking away at VeraSun's bottom line. "Beginning in the third quarter, worsening capital market conditions and a tightening of trade credit resulted in severe constraints on the company's liquidity position," according to a company report.

During Chapter 11 reorganization, VSE will "resume normal operations," company officials say. As of Monday, the company was working with its lenders to secure funding to keep existing ethanol facilities up and running. In addition, the company expects to continue buying corn. "The company expects that it will not scale back its purchases of raw materials, and corn and suppliers will continue to be paid in full for all goods and services furnished after the filing date as required by the Bankruptcy Code," according to a VSE report.

"Today's filing allows VeraSun to address its short-term liquidity constraints as we navigate historically challenging market conditions while we focus on restructuring to address the company's long-term future," says VeraSun CEO Don Endres. "We appreciate the loyalty of our employees, customers and suppliers during this challenging time."

Officials with VeraSun Energy Corporation (VSE) announced late Friday that the company and 24 of its subsidiaries have filed for Chapter 11 bankruptcy protection.

VeraSun's bankruptcy is no surprise to many farmers, considering both general economic conditions and what's happened in the ethanol industry as the economy has spiraled downward in recent months.

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