MGP to resume operations

By Erin Voegele | November 11, 2009
Report posted Nov. 25, 2009, at 1:32 p.m. CST

MGP Ingredients Inc. has entered into a joint venture agreement with Illinois Corn Processing Holdings Inc. that will allow distillery operations to resume at MGPI's 90 MMgy Pekin, Ill-based facility.

The facility will now be owned and operated by a new entity, Illinois Corn Processing LLC. According to information provided by MGPI, Illinois Corn Processing Holdings Inc. is an affiliate of Seacor Energy Inc., which paid MGPI $15 million for a 50 percent ownership interest in Illinois Corn Processing LLC. Seacor Energy is a subsidiary of Seacor Holdings Inc.

In addition to fuel-grade ethanol, the facility will produce other alcohol products as well. According to the company, the facility initially will be dedicated to the production of alcohol for beverage, industrial and fuel applications. Production is expected to resume in early 2010. Beverage- and food-grade industrial alcohol produced at the facility will be marketed by MGPI, while fuel-grade ethanol will be marketed by Seacor Energy.

According to MGPI, additional capitalization will be provided to the joint venture by an affiliate of Seacor Energy through a term loan and revolving loan secured by the facility. In addition, MGPI and Seacor Energy have agreed to a profit sharing arrangement related to the manufacturing, marketing and sales of the various alcohol products that will be produced at the facility. MGPI will also recognize charges of approximately $2.3 million in the second quarter of the company's current fiscal year related to the formation of the joint venture.

According to John Speirs, chairman of MGPI's board of directors, proceeds from the sale of a 50 percent stake in the facility to Seacor will be used to reduce debt. "Upon completion, total MGPI net debt will stand at approximately $15 million versus the net debt of $38 million that we had at the end of the first quarter of our current fiscal year and $60 million at the end of the first quarter of the prior fiscal year," he said. "With the completion of MGPI's transformation with this joint venture, the company emerges more focused, more profitable and with a significantly improved balance sheet."

According to Tim Newkirk, MGPI president and CEO, the facility will employ former MGPI personnel who were laid off last February when the company temporarily discontinued operations at the plant. He said that up to 60 individuals, consisting of plant, administrative and management personnel, are expected to be employed when it is fully operational.

MGPI originally purchased the Pekin facility in 1980. Since then, the facility has undergone several upgrades. For many years, the facility also produced commodity wheat starch and commodity vital wheat gluten. In November 2008, MGPI ceased the production of starch and protein at the plant. According to MGPI, the company has no plans to resume production of these products at the Pekin plant.