By Janet Kubat Willette
jkubat@agrinews.com
VeraSun has five plants in Iowa with locations in Albert City, Charles City, Dyersville, Ft. Dodge and Hartley.
A company spokesman said that all the plants in operation prior to the filing continue to operate.
VeraSun, which is based in Sioux Falls, S.D., reportedly hedged contracts for corn at historically high prices before prices for corn and oil began to fall.
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According to the bankruptcy filing in Delaware, VeraSun has more than $1.9 billion in debt and nearly $3.5 billion in assets.
The company announced in a Nov. 3 press release that it had received commitments for up to $215 million in debtor-in-possession financing.
AgStar has agreed to immediately provide $15 million in DIP financing to VeraSun, according to an AgStar press release. AgStar led a group of 16 other lenders in providing this financing, the release says.
Debtor-in-possession financing is generally short-term financing for the debtor while in bankruptcy. The lenders and debtors have at this point agreed to a Nov. 1, 2009, maturity date, said Heather Leiferman, public and media relations officer for AgStar Financial Services.
"The lenders group has provided DIP financing to its borrower in order to maintain ongoing operations at six plants, keep jobs in rural communities and preserve the operational value of the facilities and our borrowers," AgStar said in the release. "AgStar, of course, is also working to protect the interests of AgStar stockholders and the other creditors in the lending group."
The Minnesota Department of Agriculture has not received any calls from Minnesota farmers who have not been paid by VeraSun, said Doug Spanier, assistant director of MDA’s agricultural marketing services division.
VeraSun has posted two $50,000 bonds as first-time grain buyers in the state of Minnesota, said Jim Gryniewski, supervisor of the grain licensing division.
Farmers with questions about delivery and if their contracts will be honored are being told to contact an attorney, Gryniewski said.
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If farmers don’t get paid by VeraSun, or any other grain purchaser licensed by the state, they need to contact the Minnesota Department of Agriculture within 48 hours of when they expect payment, Spanier said. If a company is in bankruptcy, the agriculture department will let the company go through the bankruptcy before relying on the bond to cover outstanding debts.
Minnesota’s ethanol industry is in a pretty strong financial situation as a whole, said Doug Tiffany, a research fellow with the University of Minnesota Department of Applied Economics. Companies had several great years in which they were able to pay down debt. Some plants have seen tougher times in the past and planned accordingly, he said. Today’s margins are razor thin.
"This is an industry, of course, that grew like crazy, beginning in 2005, continuing through 2006 and into 2007," Tiffany said. "It’s coming to an abrupt halt. Some people weren’t prepared for that to happen.
"With the rapid growth this industry has experienced, it was ripe for consolidation when things turned sour," Tiffany said.
He said Minnesota’s ethanol cooperatives have been more guarded with their expansion plans. They also have a procurement policy with respect to their corn where their members are responsible for delivering corn to the plant.
The futures market was disabled for a time earlier this year because so many funds were hedging the value of the U.S. dollar against commodities, Tiffany said. Some of the firms that traditionally use the futures market to manage price risk got out of the market, he said.
The Associated Press contributed to this article.
