VeraSun Energy Corporation, one of the US’ largest ethanol producers, recently received a non-binding unsolicited indication of interest with respect to the purchase of substantially all of its assets. The company intends to pursue this indication of interest to its conclusion and evaluate other proposals it may receive in accordance with its obligations as a debtor in possession under chapter 11 of the Bankruptcy Code.
Due to confidentiality considerations, the identity of the third party and the terms of its indication of interest were not disclosed.
VeraSun and its 24 subsidiaries filed for chapter 11 early in November. (Earlier post.) VeraSun had hedged its corn purchases during the price spike in the summer when cost per bushel had soared to nearly $8. The collapse of corn pricing (December corn is currently just above $3.50 per bushel) left the company stuck with contracts at the much higher price. Beginning in the third quarter, worsening capital market conditions and a tightening of trade credit resulted in severe constraints on the company’s liquidity position.
Last week, VeraSun said that it would need to reject some corn contracts for delivery through 31 Dec 2008 at its Janesville and Welcome, Minn., facilities due to delayed startups. The company said that other contracts may need to be rejected or renegotiated as it continues to work through them on an individual basis.
VeraSun also said that it had temporarily ceased receiving corn and processing at certain facilities while seeking to secure additional financing.