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Pratt, Kan., Ethanol Company Seeks Chapter 11 Bankruptcy Designation

Tuesday, October 07, 2008 3:57 AM

(Source: The Kansas City Star (Kansas City, Missouri))

By Dan Margolies, The Kansas City Star, Mo.

Oct. 7--Gateway Ethanol LLC has sought Chapter 11 protection, the latest in a string of regional ethanol producers to shut down or declare bankruptcy.

Gateway of Pratt, Kan., estimated its liabilities at between $50 million and $100 million.

The bankruptcy filing, made Sunday, was not unexpected. In May, Minneapolis-based Dougherty Funding LLC, which financed construction of Gateway's ethanol plant with a $54.3 million loan, moved to foreclose on the facility.

Gateway is 62 percent owned by Orion Ethanol Inc., a publicly held company based in Pratt.

The ethanol plant began operating 11 months ago. Orion said capacity was more than 21 million bushels of corn and grain sorghum annually.

Gateway's loan default came shortly after Alternative Energy Sources Inc., a publicly owned ethanol company based in Kansas City, said that it would cease operations and Ethanex Energy Inc., which is based in Basehor, Kan., declared bankruptcy.

Late last year, E3 BioFuels LLC of Shawnee, an ethanol producer with a plant in Nebraska, also filed for bankruptcy.

Ethanol producers nationwide have been battered by surging prices for feedstock corn, the source of most ethanol, and lower ethanol prices resulting from oversupply.

In its filing, Gateway listed as its largest unsecured creditors Cargill Inc. of Minneapolis, with a claim of $7.4 million; Noble Americas Corp. of Stamford, Conn., with a claim of $4 million; and Indeck Power Equipment Co. of Wheeling, Ill., with a claim of $954,228.

Gateway said it was continuing to operate its business.

To reach Dan Margolies, call 816-234-4481 or send e-mail to dmargolies@kcstar.com.

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