Ethanol producer Biofuel Energy Corp. (BIOF: Quote) said Tuesday it will explore certain strategic alternatives, including a potential sale of one or both of its ethanol plants. The company has hired Piper Jaffray & Co. to act as its financial adviser and help in exploring strategic alternatives.
BioFuel said it received a notice of default from First National Bank of Omaha, as administrative agent for the lenders under its senior debt facility after the company's operating subsidiaries failed to pay the principal and interest that were due on September 28, 2012 on the term loans outstanding under the debt facility.
Since the initial default, BioFuel's operating subsidiaries have not made any of the regularly-scheduled principal and interest payments that have totaled $8.2 million through December 31, 2012.
However, the lenders under the senior debt facility have indicated they are willing to provide BioFuel with a grace period until July 30, 2013 to enable it to pursue strategic alternatives. The grace period would be subject to the attainment of certain milestones and extended at the sole discretion of the administrative agent under the senior debt facility.
BioFuel said that proceeds from the sale of one or both of its ethanol plants would be utilized to repay the debt under the senior debt facility and any residual proceeds after that would accrue to the company.
BioFuel has also been holding separate talks with the lenders regarding a consensus resolution on the default. Any such deal with the lenders would most likely entail the transfer of substantially all of the assets of the company's operating subsidiaries. The company's board has approved going ahead with such a transaction in the event the company is unable to achieve an alternative transaction.
At December 31, 2012, BioFuel had $9.3 million of cash and cash equivalents, of which $8.6 million was held at the parent and $0.7 million was held at the operating subsidiaries, the latter amount subject to the security interest of the lenders under the senior debt facility. These balances have not changed materially since.
BioFuel currently has two 110 million gallons per year ethanol plants in the Midwestern corn belt.
In February, BioFuel said it reduced staffing at its Fairmont, Minnesota ethanol plant, resulting in the elimination of about 40 full-time positions. The company noted that the plant had ceased ethanol production in September 2012, but will continue to operate its adjacent grain storage facility with its remaining employees.
At that time, BioFuel said it expects the Fairmont plant to remain idle until this year's harvest season. However, the company's second plant in Wood River, Nebraska was continuing normal operations with full staffing.
BIOF closed Tuesday's trading at $5.64,up $0.10 or 1.81 percent on a volume of 153,319 shares.
by RTT Staff Writer
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