Pacific Ethanol, Inc. (NasdaqGM:PEIX) announced Monday that its subsidiaries, which own its four ethanol production facilities, have filed for bankruptcy protection in an effort to restructure their debt loads.
The Company and its marketing subsidiaries, Kinergy Marketing LLC and Pacific Ag. Products, LLC, 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.
Pacific Ethanol is the latest major ethanol producer to suffer from decreased margins caused by high corn prices and lowered demand for the fuel. Rivals Aventine Renewable Energy and Verasun Energy both filed for bankruptcy within the last year.
WestLB AG and certain other lenders under the Credit Agreement dated February 27, 2007 have agreed in principle to debtor-in-possession (DIP) financing to allow for ongoing operations at the four plants. The DIP Credit Agreement is subject to approval by the bankruptcy court.
Pacific Ethanol said in a statement that 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.
Pacific Ethanol is the largest West Coast-based marketer and producer of corn-based ethanol. Pacific Ethanol also owns a 42% interest in Front Range Energy, LLC which owns an ethanol plant in Windsor, Colorado. Pacific Ethanol is working to identify and develop other renewable fuel technologies, such as cellulose-based ethanol production and bio-diesel.
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