Source: VeraSun Energy
VeraSun Energy Corp. has announced that the company and 24 of its subsidiaries have filed voluntary petitions for relief under chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware to enhance liquidity while they reorganize.
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. 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 to take better advantage of VeraSun's position as one of the nation's largest producers of ethanol.
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 is working closely with its lenders and expects to reach an agreement before the "first-day" hearing on Monday for additional committed financing to provide adequate liquidity to fund operations in the normal course.
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. VeraSun has also sought authority from the bankruptcy court to pay for goods delivered to the company on or after Oct. 11.
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.
"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."
Source: VeraSun Energy