Aventine files for Chapter 11 bankruptcy

By Erin Voegele | March 05, 2009
Web exclusive posted April 8, 2009, at 3:00 p.m. CST

Aventine Renewable Energy Holdings Inc. has announced that it and its subsidiaries have filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the District of Delaware. The company and certain holders of its 10 percent senior unsecured notes have agreed to a first priority secured debtor-in-possession (DIP) term loan totaling $30 million that will enable the company to continue to satisfy customary obligations associated with its ongoing operations. The DIP loan provided by certain bondholders will provide the company with new liquidity permitting it to maintain normal operations and allow the company and its creditors to jointly plan for the future.

Aventine has filed first day motions that ask the court to approve, among other things, payment of employee wage and benefit charges that were incurred before the petition was filed, and the continuation of cash management systems. According to Ron Miller, Aventine's president and chief executive officer, the vast majority of Aventine's suppliers will not see any disruptions in their business dealings with the company.

Information released by the company states that the ethanol industry is currently suffering from poor operating margins, which are the result of supply that exceeds demand. Demand for ethanol has been negatively impacted by low gas prices that have practically eliminated discretionary use of the fuel. According to Aventine, demand for ethanol has also been negatively affected by refiners and blenders using excess renewable identification numbers (RIN) to help meet their renewable fuels standard obligations, instead of purchasing actual gallons of ethanol.

Miller said that filing for Chapter 11 was a necessary step that will allow Aventine to continue to operate without interruption. "We will use the Chapter 11 process to more rapidly restructure our overhead, pursue potential investors, and definitively resolve our debt issues," he continued.

According to Miller, the long-term prospects of the ethanol industry are sound, and Aventine anticipates a strong rebound as the government RFS continues to increase and the supply of excess RINs are consumed. "We are taking steps to ensure our business will be ready when the current markets turn up again," Miller said.