VeraSun Energy Corporation, owner of Albion’s ethanol plant since September, 2007, filed voluntary petitions late last week for relief under Chapter 11 of the U.S. Bankruptcy Code.
VeraSun announced the filing in a news release dated Friday, Oct. 31. The company said it made the filing to enhance liquidity while reorganizing.
“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,” VeraSun announced. “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 the Chapter 11 petitions.
Still one of the nation’s largest ethanol producers, VeraSuun said it “intends to maintain operations” at all of its plants, ensure continued supply of product to its customers and fulfill all customer obligations.
The company stated it is working closely with its lenders and expected to reach an agreement before the “first-day” hearing on Monday, Nov. 3, for additional committed financing to provide adequate liquidity for the normal course of operations.
Further, VeraSun stated it does not expect 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 as required by the Bankruptcy Code. The Company has also sought authority from the bankruptcy court to pay for goods delivered to the Company on or after October 11, 2008.