Aventine Renewable Energy Holdings, Inc. (Pink Sheets:AVRN), Wednesday announced that it and its subsidiaries have filed voluntary petitions for Chapter 11 bankruptcy in the District of Delaware.
The Company and certain holders of its 10.0% senior unsecured notes have agreed to a first priority secured debtor-in-possession (DIP) term loan totaling $30 million that will enable the Company to continue to satisfy customary obligations associated with its ongoing operations. The DIP loan provided by certain bondholders will provide the Company with new liquidity permitting it to maintain normal operations and allow the Company and its creditors to jointly plan for the future, the company said in a release.
The ethanol industry currently suffers from poor operating margins as a result of supply exceeding existing demand, including the 2009 renewable fuels standard mandate. Ethanol demand has been negatively affected by low gasoline prices which has all but eliminated the discretionary consumption of ethanol.
Aventine said ethanol demand has also been negatively affected by refiners and blenders using excess renewable identification numbers ("RINS") to help meet their renewable fuels standard obligations instead of purchasing actual gallons of ethanol
Ron Miller, Aventine’s President and CEO, said, "After careful consideration of all available alternatives, the Company determined that filing for Chapter 11 was a necessary and prudent step that allows us to operate our business without interruption. We will use the Chapter 11 process to more rapidly restructure our overhead, pursue potential investors, and definitively resolve our debt issues."
Miller continued, "The ethanol industry has sound long-term prospects, and we anticipate a strong rebound as the government imposed biofuels mandate continues to increase and the supply of excess RINS are consumed. We are taking steps to ensure our business will be ready when the current markets turn up again. The vast majority of our suppliers will not see any disruptions in their business dealings with us."
Aventine has filed first day motions that ask the Court to approve, among other things, payment of employee wage and benefit charges that were incurred before the petition was filed, and the continuation of cash management systems.
Aventine is being advised by its legal counsel, Davis Polk & Wardwell, LLP; and Young Conaway Stargatt & Taylor, LLP; and its financial advisor Houlihan Lokey Howard & Zukin.
In addition to ethanol, Aventine also produces distillers grains, corn gluten meal, corn gluten feed, corn germ and brewers’ yeast.
Aventine’s bankruptcy is the latest of several biofuel makers including VeraSun and Nova Biosource.
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