By Todd Neeley
DTN Staff Reporter
OMAHA (DTN) -- Abengoa Bioenergy's ethanol plants in the United States will have $1.5 million to cover payroll and other expenses for the next week, the United States Bankruptcy Court, Eastern District of Missouri in St. Louis, ruled on Tuesday.
Abengoa operates ethanol plants in Nebraska, Kansas, New Mexico, Illinois and Indiana.
When Abengoa Bioenergy filed for Chapter 11 bankruptcy protection on Feb. 24, the company had lined up a $41 million bankruptcy financing package from a unit of Sandton Capital Partners. Since then, there has been an ongoing wrestling match between creditors and the company over how that money should be spent among the company's entities. On March 2, the bankruptcy court allowed Abengoa and its five affiliates to draw $8 million of the $41 million bankruptcy financing package. The $1.5 million of financing approved by the bankruptcy court this week is part of that financing package.
Attorneys for the company argued this week the company could face "irreparable" harm if the interim financing was not approved.
Attorneys for one of the creditors argued in court Tuesday the company has not said how the $1.5 million would be dispersed among the assets in the United States. By and large, however, creditors agreed the financing was necessary to maintain relationships with employees and other business partners in the United States.
Also this week, the parent company Spain-based Abengoa SA filed for Chapter 15 bankruptcy in a U.S. Bankruptcy Court for the District of Delaware. Chapter 15 is necessary to allow a foreign company to access United States courts regarding the ongoing bankruptcy proceedings. In addition, the parent company announced this week it intends to file Chapter 11 on all of its United States assets.
Until now, there were indications that production was still ongoing at the company's plants in Indiana and Illinois.
The parent company announced in a news release this week it has 75% approval of its restructuring plan from lenders. Spanish law requires approval from 60% of lenders.
This has allowed the company to negotiate what is called a standstill contract. That will permit the company to exercise certain rights for resolution and early maturity of financing, as it undergoes restructuring.
The parent company has announced that as part of its restructuring, it intends to sell ethanol assets in the United States and other countries.
"Abengoa would like to thank the support it has received as well as the confidence that the employees, lenders, providers, clients, consultants as well as all other stakeholders have shown," the company said in a news release. "Thanks to this collaboration the company will be able to guarantee the solid business and new operating framework upon which it will build value and maximize its technology and pipeline to generate economic returns in the long term.
"Abengoa is working hard to meet the objectives set out in the re-sizing of the company, providing it with the necessary financial security, leadership and management to enable it to develop its operational and financial potential, its growth and profitability."
Nebraska grain companies caught up in the bankruptcy objected to Abengoa's recent financing in a court filing last 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 Missouri court, the Abengoa creditors who are 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, which include Gavilon Grain LLC; Farmers Cooperative Association in Ravenna; Farmers Cooperative in Dorchester, Nebraska; The Andersons Inc. and Central Valley Ag Cooperative, indicated in court documents any attempt to restart production at the plant in Ravenna would not follow federal code.
The $41 million financial package lined up by Abengoa is called in bankruptcy court "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 have argued 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.
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.
Todd Neeley can be reached at todd.neeley@dtn.com
Follow him on Twitter @ToddNeeleyDTN
(AG/SK)
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