VeraSun Files for Chapter 11


VeraSun Energy Corporation, one of the nation’s largest corn ethanol producers, has filed voluntary petitions for relief under chapter 11 of the US Bankruptcy Code to enhance liquidity while they reorganize.

VeraSun hedged its corn purchases during the price spike in the summer when cost per bushel had soared to nearly $8. The collapse of corn pricing (December corn is currently just above $4 per bushel) left the company stuck with contracts at the much higher price. 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.

Squeezed by these factors, VeraSun and its 24 subsidiaries filed chapter 11 petitions to facilitate access to additional liquidity while they reorganize to take better advantage of VeraSun’s position as one of the nation's largest producers of ethanol.

During the chapter 11 proceedings, VeraSun plans to resume normal operations. The company is acting to ensure continued supply of product to its customers and to fulfill all customer obligations. In that regard, VeraSun is working closely with its lenders and expects to reach an agreement before the “first-day” hearing on Monday for additional committed financing to provide adequate liquidity to fund operations in the normal course.

VeraSun does not anticipate scaling 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 as required by the Bankruptcy Code.

VeraSun has also requested the bankruptcy court’s approval to continue to pay employees in the ordinary course without interruption, and expects the request to be granted as part of the court’s “first day” orders.

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% ethanol and 15% gasoline for use in Flexible Fuel Vehicles (FFVs), directly to fuel retailers under the brand VE85.

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