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SIOUX FALLS, S.D. -- After filing for relief under Chapter 11 in U.S. Bankruptcy Court on Oct. 31, ethanol producer and VE85 marketer VeraSun Energy Corp. received commitments for up to $215 million in debtor-in-possession financing, the company stated.
The U.S. Bankruptcy Court District of Delaware in Wilmington approved $40 million in interim financing and granted access to cash collateral for immediate use. The company also won interim court authority to pay outstanding employee checks, pay suppliers for post-petition goods and services, and pay suppliers up to $20 million for goods delivered on or after Oct. 11, 2008.
"The financing package allows VeraSun to maintain operations and continue supplying its customers," said Don Endres, VeraSun CEO. "The relief granted by the court today will allow us to focus on our operations and, at the same time, provide VeraSun with the liquidity and ability to continue operations, which means producing ethanol and distillers grains, paying suppliers, and satisfying customer needs for product."
Shares of VeraSun Energy Corp., which accounts for about 13 percent of the nation's ethanol capacity, were suspended Monday on the New York Stock Exchange as the company sought $190 million to make payroll.
VeraSun and 24 of its subsidiaries filed for Chapter 11 protection to enhance liquidity while they reorganize to take better advantage of VeraSun’s position as one of the nation's largest producers of ethanol, the company said at the time.
"The filing was precipitated by 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," the company said in a statement. "The company suffered significant losses in the third quarter of 2008 from a dramatic spike in its corn costs, reflecting in part costs attributable to its corn procurement and hedging arrangements, and historically unfavorable margins.
"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. Faced with these constraints, VeraSun and 24 of its subsidiaries filed their chapter 11 petitions to facilitate access to additional liquidity while they reorganize."
VeraSun is not expected to scale back its purchases of raw materials, and corn and other suppliers will continue to be paid in full for all goods and services furnished after the filing date.
Founded in 2001, VeraSun has a fleet of 16 production facilities in eight states, of which one is still under construction. VeraSun Energy is scheduled to have an annual production capacity of approximately 1.64 billion gallons of ethanol and more than 5 million tons of distillers grains by the end of 2008. VeraSun also markets E85, a blend of 85 percent ethanol and 15 percent gasoline for use in flexible fuel vehicle, directly to fuel retailers under the brand VE85.
In September, in light of interest "expressed by multiple parties" during its previously announced equity offering, VeraSun retained Morgan Stanley to act in an advisory capacity to evaluate strategic alternatives. At that time, it suspended its equity offering.