VeraSun Energy (VSUNQ): Ain't No Sunshine When the Money is Gone
We remain bearish on VeraSun Energy (VSUNQ), which filed for Chapter 11 bankruptcy protection in October 2008, precipitated by after-shocks of significant hedging losses, weak ethanol prices and higher financing costs. Subsequently, the stock was de-listed from the NYSE.
However, the company was able to procure commitments for approximately $197 million in debtor-in-possession financing. With?12 of its?16 plants sitting idle, the company procured court approval for the sale of?7 of its plants as part of a new bankruptcy financing agreement.
- VeraSun Energy on October 31, 2008 filed for Chapter 11 bankruptcy protection as a result of significant hedging losses and higher financing cost precipitated by expansion activities.
- VeraSun Energy shares have moved from trading on the NYSE (VSE) to the OTC (VSUNQ).
- VeraSun Energy received interim approval from a Delaware bankruptcy court judge to auction by the end of March 2009, seven of the eight U.S. BioEnergy plants it bought in April 2008.
- The company received final approval for $196.6 million in debtor-in-possession financing from undisclosed holders of its 9.875% senior secured notes (due 2012) and AgStar Financial Services led lenders group.
- In the 3rd quarter of 2008, VeraSun Energy's revenue increased nearly five-fold and surpassed the one billion dollar mark. However, net loss rose to $476.1 million compared to net income of $7.8 million in the year-ago quarter.
- VeraSun Energy acquired U.S. BioEnergy in an all-stock acquisition, paying 0.81 shares of VeraSun Energy for each share of USBE. This represents an 11.1% premium to USBE shareholders based on November 23, 2007 closing prices. The transaction closed effective from April 1, 2008.
- In June of 2006, VeraSun completed its IPO, raising net proceeds of $236 million. The company produces corn-based ethanol and its co-product, distillers' grains.
VeraSun Energy is an industry-leading ethanol producer in the USA. The company went public in June of 2006 raising net proceeds of $236 million. VeraSun, with the completion of its merger with US BioEnergy on April 1, 2008, had eleven facilities in operation with a combined yearly ethanol production capacity of 1.1 billion gallons.
With fourteen operational facilities, the company has a total production capacity of 1.42 billion gallons of ethanol and more than 4.5 million tons of distillers' grains per year. As of November 6, 2008, VeraSun Energy's ethanol production capacity represented approximately 13% of the total ethanol production capacity in the USA, according to the RFA. The company also sells ethanol co-products, such as distillers' grains, and markets its branded E85 fuel, VE85 (85% ethanol and 15% gasoline) at more than 150 retail locations.
VeraSun is also planning to launch another fuel blend variant (30% ethanol and 70% gasoline) VE30. The company also entered into corn oil production. It began construction of a corn oil extraction facility at its plant in Aurora, South Dakota in December 2007.
On October 31, 2008, VeraSun and 24 of its subsidiaries filed for relief under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the District of Delaware in Wilmington. Subsequent to that the company received interim approval from a Delaware bankruptcy court judge to auction by the end of March 2009, seven of the eight U.S. BioEnergy plants that it had previously acquired, with the exception of Marion, South Dakota plant.
