Nov 4

Written by: ngreditor
11/4/2008 10:59 PM 

VeraSun files for Chapter 11, says it will "continue operations"

Kenneth Purscell

Economic problems that have been afflicting the nation have begun to strike home here in Nebraska. VeraSun Energy Corporation, based in Sioux Falls, SD, has filed for Chapter 11 bankruptcy protection on October 31.

VeraSun owns and operates the ethanol plant at Albion. The impact on local employment is not yet apparent.

In a press release, the company said it would ask the bankruptcy court for the authority to continue operations, to pay employees, and to pay for goods delivered before October 11, 2008.

According to reports from Reuters and the Associated Press, the bankruptcy court in Delaware approved a rare financing strategy that would allow a nearly $220 million injection of cash from groups of existing lenders. This cash would allow continued operations during reorganization.

The company was hit hard both by volatility in corn prices this summer and by the credit crunch this fall. The company had hedged a corn price of $8 per bushel just as corn prices were reaching their peak this summer. Corn has since fallen to less than $4 per bushel, insuring that the company would lose money on the transactions.

The credit pressures of the national economy meant that VeraSun could not easily find cash to cover operating expenses.

The future for local employment is not the only issue. Farmers making delivery to the company are less than certain about payment. The company has said that they will honor contracts. But the Nebraska Farm Bureau has issued guidelines about delivering crops to struggling purchasers.

Nebraska Farm Bureau President Keith Olsen said Friday (Oct. 31). “Farmers delivering grain on contract are oftentimes unsecured creditors. If something happens, they could risk not being paid.”

The Farm Bureau reminds farmers that they need to visit with an attorney before failing to deliver crops on a contract, even if the purchaser is having difficulty. The full Farm Bureau statement can be found on the Internet at http:// www.nefb.org/news/news. aspx?archive=0&id=1891.