Pacific Ethanol has said that its wholly-owned subsidiary Pacific Ethanol Holding (PEH), together with PEH's four wholly-owned ethanol production facilities (plant subsidiaries), has filed a plan of reorganization with the US bankruptcy court in Delaware in cooperation with WestLB and other secured lenders.
PEH and its plant subsidiaries are expected to emerge from bankruptcy near the end of the second quarter of this year. The proposed plan provides for up to $35m in a new line of credit to support current and future plant operations and restructures the $293.5m of secured debt of the plant subsidiaries to a combination of equity and $115m of secured and subordinated debt.
Under the plan, the ownership of the plant subsidiaries will be transferred to a newly formed holding company (New PEH) owned by the lenders. The company will continue to staff, manage and operate the plants under the terms of an amended and restated asset management agreement and will continue to market all the ethanol and distillers grains produced by the plants under the terms of the amended and restated agreements with the company’s subsidiaries, Kinergy Marketing and Pacific Ag Products.
Pacific Ethanol is currently negotiating with the lenders regarding a potential acquisition of ownership interests in New PEH. If these negotiations result in an agreement, the plan will be amended.
The company believes that the combination of new and restructured debt under the plan will provide the needed liquidity to support the resumption of operations at the plants located in Madera and Stockton, California, and sustained production of ethanol at all four plants, as market conditions permit.
Neil Koehler, CEO and president of Pacific Ethanol, said: “The plan will significantly improve the balance sheets of the company and its plant subsidiaries by reducing debt and providing new working capital. We believe the combined companies will be well positioned to continue as the leading producer and marketer of low carbon renewable fuels in the Western United States.
“Working in cooperation with our lenders in filing this Plan, we are excited about the long term, strategic growth opportunities for the company as the market for our products and services continues to expand.”