VeraSun announces $196.6M financing plan

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By The Associated Press

SIOUX FALLS, S.D. — Ethanol producer VeraSun Energy Corp. has announced that the U.S. Bankruptcy Court has entered orders granting final approval for debtor-in-possession financing totaling $196.6 million.

The financing includes $93.6 million of incremental financing to be provided by certain holders of VeraSun’s 9 7/8-percent senior secured notes due 2012.

The incremental financing will be available to fund operations at ethanol production facilities in Aurora, S.D., andFort Dodge, Charles City and Hartley, Iowa; and to maintain the idled Welcome, Minn., facility.

The balance of the financing consists of about $103 million used to refinance prepetition loans that had been made by the noteholders who participated in the debtor-in-possession financing. That financing matures in November 2009.

The bankruptcy court also issued final approval for a group of lenders led by AgStar Financial Services to provide a $24.5 million debtor-in-possession facility, including $15 million that was previously loaned on an interim basis, for VeraSun production facilities in Central City and Ord; Dyersville and Albert City, Iowa; Hankinson, N.D.; and Woodbury, Mich.

The incremental $9.5 million will be used to maintain the production facilities in a safe and operable condition through Jan. 15, 2009 pending a more permanent financing arrangement.

The workforce at the production facilities will be retained during this period, but VeraSun does not expect the facilities to produce ethanol until permanent financing is secured.

The court also approved an initial $10 million in financing on an interim basis from West LB to fund operations at facilities in Albion.; Linden, Ind.; and Bloomingburg, Ohio.

West LB would provide an aggregate of $20 million in funding, the balance of which will become available upon final approval scheduled for hearing on Jan. 8.

“The DIP financing will allow us to focus on running the business while undergoing the restructuring process as part of addressing VeraSun’s long-term future,’’ said VeraSun CEO Don Endres.

VeraSun continues efforts to secure long-term financing for its ethanol production facility in Marion, S.D. Its facility in Janesville, Minn., remains idle.

The court approved the company’s request to reject certain corn contracts for delivery through December at the idled Welcome and Janesville facilities. The Company also intends to reject corn contracts for delivery through Jan. 31 at those facilities.

In addition, because the company does not expect to operate the production facilities located in Central City, Ord, Dyersville, Albert City, Hankinson and Woodbury through Jan. 15, the company told the court that it intends to reject contracts for delivery of corn scheduled at these plants.

This action responds to a number of requests by producers to gain certainty on the status of their corn contracts and will allow them to move forward to remarket their corn.

VeraSun, the nation’s No. 2 ethanol producer, and 24 of its subsidiaries filed petitions for relief under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court in Wilmington, Del., on Oct. 31.

With slim profit margins already weighing on the biofuels industry, VeraSun found itself short of cash in the third quarter after locking in at higher-than-market corn prices.

Trading of the company’s shares on the New York Stock Exchange was suspended on Nov. 3.