Tuesday, Credit Suisse downgraded Pacific Ethanol, Inc. (PEIX) shares to Underperform from Neutral and lowered its price target to $0.20 from $0.50. The brokerage widened its 2009 first quarter loss per share estimate to $0.31 from $0.05, and its 2009 loss estimate to $1.19 from $0.62.
Analyst Flannery downgraded the stock and lowered price target to reflect what he views as potential impending bankruptcy risk. As mentioned in the analyst's note "Extension of forbearance agreements; 2 more facilities idled" from February 27, 2009, PEIX was able to extend the forbearance agreements with its lenders until March 31, 2009.
The analyst said that PEIX has since been successful in further extending these agreements until April 30, 2009, which has given the company a little more time to try and restructure its debt. However, the analyst doesn't see an indefinite extension of these agreements as feasible or likely.
The analyst noted that PEIX does not expect to have adequate liquidity available to meet its needs after April 30, 2009, post the expiration of the forbearance agreements with its lenders. The ethanol industry is currently operating at or near break-even levels, and two other publicly quoted ethanol producers have already filed for bankruptcy.
The analyst added that if ethanol margins do not improve from here and PEIX is unable to restructure its debt obligations by April 30th, 2009, or extend the forbearance agreements once again, a filing for bankruptcy protection seems likely.
The analyst said that PEIX terminated the CFO's employment with the company on April 3, 2009, while in the latest 10-K filing PEIX's auditors have expressed their doubt over the company's ability to continue as a going concern.
Currently, PEIX is up $0.03 or 8.33% and trading at $0.39.
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