VeraSun Declares Bankruptcy
Chapter 11 reorganization to give the company liquidity as it works to reorganize.
Compiled by staff
Published: Nov 1, 2008
VeraSun Energy Corporation, announced late Friday that it and 24 of its subsidiars have filed for Chapter 11 bankruptcy protection. This allows the company to reorganize its finances.
According to a release from the company, the filing was "precipitated by a series of events that led to a contraction in VeraSun's liquidity, impairing it's ability to operate its business and invest in production facilities."
The company took a hit on third-quarter earnings for 2008 from a spike in corn costs, which showed up in its corn procurement and hedging arrangements. The tightening credit market apparently compounded the problem and faced with those restraints the bankruptcy was the best option. The company reports it can have enhanced liquidity under bankruptcy protection as it reorganizes.
The company hired Morgan Stanley in September to evaluate strategic alternatives for the business and it has lined up $250 million in financing through the prepackaged bankruptcy, according to a Wall Street Journal Report.
The company's stock price tumbled to less than $1 this week on rumors of the impending bankruptcy. Rating agencies had started downgrading the value of VeraSun stock this week as well. One of those agencies - Moody's - notes more than $660 million in secured and unsecured notes.
VeraSun had tried to obtain equity capital in September and failed. After that failure, the firm announced its relationship with Morgan Stanley, a move that many saw as a first-step to finding a buyer for the company. The Chapter 11 reorganization offers companies protection as they restructure debt.
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