Panda Ethanol restructures loans for Texas facility

By Susanne Retka Schill | October 06, 2008
Web exclusive posted Oct. 16, 2008 at 1:41 p.m. CST

Panda Ethanol Inc. has restructured the funding arrangements on its 115 MMgy ethanol plant in Hereford, Texas. The restructuring, which was made with the support of the project's senior and subordinated lenders, will allow for construction to be completed and the plant to start up Jan. 30.

According to Panda Ethanol, the senior lenders waived provisions in the original financing agreements to allow the company to make construction-related borrowings of up to $31.5 million. The project can also draw upon $2.5 million in new proceeds received from the Hereford subsidiary's subordinated lender. Last month, Panda Ethanol dismissed the project's general contractor and announced it will complete the project itself.

Panda Ethanol, the parent company of the Hereford project, will also receive $2.5 million in working capital from a new equity investment from Panda Energy International, Panda Ethanol's founder and single largest shareholder. In addition, the company also announced it has retired a $1.6 million loan from Panda Energy, with the debt converted to common stock in Panda Ethanol at the price of 25 cents per share. Company representatives say it may need to obtain additional working capital for the future operation of the facility depending on future market conditions and commodity pricing.

"The successful restructuring of the Hereford project's funding arrangements represents a vote of confidence in our ability to manage the remaining construction at the Hereford facility," said Darol Lindloff, chief executive officer of Panda Ethanol. "Today, there are a large number of subcontractors and a very talented and well-trained team of employees at the site who are working to complete construction and ready the Hereford refinery for start-up."