VeraSun Energy Corporation (NYSE: VSE – News), one of the nation’s largest ethanol producers announced Friday that it has filed for bankruptcy in the District of Delaware.
The company, which reported record quarterly revenues in August 2008, said if filed voluntary petitions for relief under chapter 11 of the U.S. Bankruptcy Code to "enhance liquidity" while it reorganizes.
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, it said in a release.
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 their chapter 11 petitions to facilitate access to additional liquidity while they reorganize.
Company Intends To Maintain Operations
During the chapter 11 proceedings, VeraSun plans to resume normal operations. The Company has taken steps to ensure continued supply of product to its customers and to fulfill all customer obligations. In that regard, VeraSun said it is working closely with its lenders and expected to reach an agreement before today for additional committed financing to fund operations.
The Company expects that it will not 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.
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, to be issued today.
"Today’s filing allows VeraSun to address its short-term liquidity constraints as we navigate historically challenging market conditions while we focus on restructuring to address the company’s long-term future," Don Endres CEO said. "We appreciate the loyalty of our employees, customers and suppliers during this challenging time."
About VeraSun Energy Corporation
VeraSun Energy Corp., headquartered in Sioux Falls, S.D., is a leading producer and marketer of ethanol and distillers grains. Founded in 2001, the company 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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