Pacific Ethanol, Inc. (Pacific Ethanol) has announced that its subsidiaries which own its four wholly-owned ethanol production facilities (Plant Subsidiaries) have filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the District of Delaware in an effort to restructure their indebtedness. The company and its marketing subsidiaries, Kinergy Marketing LLC (Kinergy) and Pacific Ag. Products, LLC (PAP), have not filed for Chapter 11 bankruptcy protection.
The Company is expected to continue to manage the Plant Subsidiaries under an Asset Management Agreement and Kinergy and PAP are expected to continue to market and sell the Plant Subsidiaries’ ethanol and feed production under existing Marketing Agreements.
The Plant Subsidiaries and WestLB AG and certain other lenders under the Credit Agreement dated February 27, 2007 have agreed in principle to first priority secured debtor-in-possession (“DIP”) financing in a maximum amount of $20 million that is intended to enable the Plant Subsidiaries to continue to satisfy customary obligations associated with their ongoing operations. The Plant Subsidiaries and the lenders have negotiated a proposed DIP Credit Agreement. The DIP financing is subject to approval by the bankruptcy court and final documentation as well as numerous other conditions to closing.
Kinergy has renegotiated and amended its credit facility with Wachovia Capital Finance Corporation. Wachovia has agreed to continue providing up to $10 million for Kinergy’s working capital needs. The term of the amended credit facility extends through October 2010. Kinergy’s business is expected to continue uninterrupted.
Neil Koehler, Pacific Ethanol’s chief executive officer and president said, “We have worked well with our creditors to develop a plan that we believe allows us to continue operations and meet our commitments to our customers and vendors. We are unwavering in our vision of being a leading producer and marketer of low carbon fuels in the Western United States. While the market environment for the ethanol industry has been challenging over the last several quarters, we remain confident that a restructured company will grow and prosper as the demand for low carbon fuels increases.”
Bill Jones, Pacific Ethanol’s chairman of the board said, “We appreciate the support of West LB, Wachovia and the work of our management team. Our objective is to move this process forward as quickly as possible so that we can maintain our focus on serving our fuel and feed markets”