Thursday, June 10, 2010

Pacific Ethanol expects to emerge from bankruptcy

A deal between Pacific Ethanol Inc. and its lenders will enable the Sacramento-based company to shed significant debt and move forward with bankruptcy reorganization, officials have said.

The Chapter 11 reorganization plan, approved by a judge in Delaware and expected to become effective at the end of the month, would eliminate about $290 million of debt and other liabilities and provide a line of credit of up to $15 million that could be expanded later, officials said Wednesday.

"New liquidity and low debt levels provided by the plan support our efforts to optimize operations at the two facilities currently running, and as market conditions permit, resume operations at the two idled facilities," said Neil Koehler, CEO and president, in a statement. "We are optimistic about the future of the ethanol industry and the success of our company.”

The idled plants are outside Madera and Stockton and are expected to restart production eventually. Three of the company's four plant shut down early last year. The company filed for bankruptcy protection in May 2009.

The Sacramento Bee's Dale Kasler reported today that Pacific Ethanol "fell victim to a dramatic drop in ethanol prices brought on by a glut in supply." He said prices for the fuel additive since "have recovered, production is perking up – and analysts say another glut is possible."

Under the plan, company said, ownership will be transferred but Pacific Ethanol will continue to staff, manage and operate its four manufacturing plants for a fee and profit sharing. The company also "will continue marketing ethanol for third parties as well as the ethanol" produced by the plants. Pacific Ethanol would have the option to purchase up to 25% of the new company.

Pacific Ethanol, which trades under PEIX on Nasdaq, closed at 79 cents per share, up 2 cents or 3.8 percent.

The San Joaquin Valley Clean Energy Organization is a nonprofit dedicated to improving our region's quality of life by increasing its production and use of clean and alternative energy. The SJVCEO works with cities and counties and public and private organizations to demonstrate the benefits of energy efficiency and renewable energy throughout the eight-county region of the San Joaquin Valley.

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