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Look for more ethanol bankruptcies

Agriculture.com Staff 11/18/2008 @ 1:05pm

The ethanol industry is headed for a shakeout and consolidation as a record number of plants face bankruptcy, lenders attending the American Bankers Associatioon’s Agricultural Bankers Conference were told Monday.

"There's very possibly going to be 40 plants by the end of January that are in Chapter 11 [bankruptcy]" merger and acquisition specialist Mark Lakers told the bankers at their annual meeting in Des Moines, Iowa.

Lakers, who heads Agribusiness and Food Associates of Omaha, Nebraska, said that he expects the industry to go through a consolidation similar to what he has seen before in poultry and hog production.

The 40-some plants that could be in bankruptcy by early next year include 16 owned by VeraSun energy, which is currently operating under Chapter 11 bankruptcy.

The surviving companies will be those that can afford to buy new technology, corn fractionation and fluidized bed reactors, that can lower production costs by 70 cents a gallon.

Lakers said that the ethanol industry will likely be taken over by investors who are looking for bargains and by existing ethanol companies that have no debt. The investors will be able to take over some financially troubled ethanol companies by assuming their senior debt, he said.

"It's not going to bail out the current producers who are in trouble," he said.

The ethanol industry is headed for a shakeout and consolidation as a record number of plants face bankruptcy, lenders attending the American Bankers Associatioon’s Agricultural Bankers Conference were told Monday.

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