Web exclusive posted March 6, 2008 at 6:45 p.m. CST 
 
 A bankruptcy judge has authorized the sale—without an auction—of Central Illinois Energy Co-op, a 37 MMgy ethanol plant in Canton, Ill., to a buyer for a minimum bid of $33 million.
 
 That's the amount CIE has been appraised at, after investors spent $130 million to build it to near-completion. Another $25 million may be necessary to finish construction before the plant produces any ethanol, CIE's bankruptcy attorney Barry Barash said. 
 
 The sale, which will take place April 9, was expected to favor major creditors Whitebox Advisors, a Minneapolis hedge fund, and lender Credit Swisse, but during the Feb. 26 hearing, Florida-based NexGen Biofuels proposed buying the plant for $20 million to $25 million. "They came out here, looked around, kicked the tires and asked questions," Barash said. "Their pitch was rejected by the creditors, the directors of the company and the bankruptcy judge." However, he said the door isn't closed to prospective buyers, including NexGen.

 
 Credit Swisse and Whitebox have made a credit bid of $80 million. A credit bid is the opening bid in a foreclosure or bankruptcy proceeding, and usually represents the outstanding loan balance, amount of defaulted payments and sales costs. Their bid also includes a proposal to pay off $25 million to $30 million in mechanics liens within five days once the sale is approved and after determining the validity of those claims. 
 
 "The most likely scenario is that Credit Swisse and Whitebox will get it," Barash said, adding that if he were either creditor, he might jump at a bid around $40 million even though "you'd have to be crazy to pay that."
 
 The judge also approved spending $5.5 million to keep the plant running, but that sum wasn't without some heated discussion, Barash admitted. Creditors questioned appraisal costs of $90,000, NexGen and unpaid contractors objected to weekly payments of $7,000 per week to restructuring agent Brent King, and an additional $100,000 "success fee" bonus and $85,000 in bonuses for employees who have kept the plant running. The budget also included $300,000 in legal and financial fees, and $2.3 million in bank fees.
 
 The creditors who won't be compensated include the co-op of 260 farmers who invested cash and corn in CIE, which broke ground in 2006. An initial budget of $40 million more than doubled to $90 million as construction costs escalated, later rising to $130 million. 
 
 CIE's prime contractor, Tennessee-based Lurgi PSI, discontinued its work in November 2007, six months after it first learned of liquidity problems and CIE owned the coontractor nearly $10 million.
 
 When asked if an arbitrage group would be qualified to run an ethanol plant, Whitebox's Jonathan Wood said, "We don't comment on investments either that we have currently made or future investments." Whitebox buys distressed companies, runs them until they're solvent and then flips them, one industry insider said.
 
 At press time, NexGen had not returned EPM's calls. The company is currently developing five biofuel plants throughout the Midwest.

Bankrupt Illinois plant to be sold

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Upcoming Events

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North American SAF Conference & Expo

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Bankrupt Illinois plant to be sold