By Todd Neeley
DTN Staff Reporter
OMAHA (DTN) -- A group of Nebraska grain providers to Abengoa Bioenergy ethanol plants is not happy with the recent court approval of $41 million of financing the company obtained as part of Chapter 11 bankruptcy proceedings ongoing in a United States bankruptcy court.
Nebraska grain companies caught up in the bankruptcy objected to Abengoa's recent financing in a court filing this week. A group of farmer cooperatives and other grain companies question the validity of using some of the money to restart production at ethanol plants in Ravenna and York, Nebraska.
In an objection filed with the U.S. Bankruptcy Court for the Eastern District of Missouri in St. Louis, the Abengoa creditors owed some $35 million in cash for undelivered grain to plants in Nebraska pointed out the Ravenna plant was closed because of poor production economics unrelated to Abengoa's financial troubles in Spain.
As a result, the creditors that include Gavilon Grain LLC; Farmers Cooperative Association in Ravenna; Farmers Cooperative in Dorchester, Nebraska; the Anderson's Inc. and Central Valley Ag Cooperative, indicate in court documents any attempt to restart production at the plant in Ravenna would not follow federal code.
Abengoa received $41 million in what is called in bankruptcy court as "debtor-in-possession financing," which is often used for a company to try to restart production at a facility or keep it operating until the operation can be either sold or restructured. The debtor-in-possession financing is designed to provide working capital to Abengoa's six separate ethanol entities in the United States while the company works toward selling those ethanol assets.
The Nebraska grain companies argue that Abengoa is using the Ravenna plant as collateral for debtor-in-possession financing and thus would put the facility at risk for post-bankruptcy liens and other credit problems.
Under the bankruptcy court, some of Abengoa's financing conditions include using proceeds generated from restarted production in Ravenna to restart ethanol production at the company's ethanol plant in York, Nebraska, as well.
It is unlikely Abengoa ethanol plants in Colwich, Kansas, and Portales, New Mexico, will ever return to production, according to the objection filed in court. The Nebraska grain companies argue the cash flow from the Ravenna plant won't be segregated to pay existing creditors such as the unpaid grain deliveries.
The creditors noted in the objection there is little evidence based on current low ethanol prices that restarting the Ravenna ethanol plant would provide any real economic benefit.
Production was halted at the Ravenna plant in November 2015, "not simply because of a lack of working capital, as described in the supporting declaration. Instead, the Ravenna facility ceased operations because of the precipitous decline in the price of ethanol and petroleum-based fuel as a whole, which is an economic factor these debtors cannot control.
Abengoa SA, the Spanish-based parent company, recently announced a restructuring plan to allow the company to continue operating. Part of that plan was to sell off ethanol assets in the United States and other countries.
In recent weeks, the company has asked Spanish authorities to stop the clock on potential bankruptcy proceedings in that country, in order to give Abengoa up to seven months to implement its restructuring plan.
Todd Neeley can be reached at todd.neeley@dtn.com
Follow him on Twitter @ToddNeeleyDTN
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