VeraSun Lives On

Bankrupt company reaches out as if from the grave
By Holly Jessen | November 15, 2010
Long after most people assumed it was dead and gone, VeraSun Energy Corp. is still going after money it paid out two years ago. It raises the question, just who is VeraSun and what does it want?
VeraSun and its 24 subsidiaries, 16 of which were ethanol plants, filed for Chapter 11 bankruptcy in 2008. Today, VeraSun exists as a bankruptcy estate, says Todd A. Taylor, co-chair of clean technology group for Minneapolis-based Fredrikson & Byron P.A. All of VeraSun's claims or any assets it still has are controlled by a creditors committee, appointed by the bankruptcy court.

At the end of September, the VeraSun estate backed off demands that corn producers return money that had been paid out to them during the 90-day look-back period before the company filed for bankruptcy. That doesn't mean the efforts to collect money are over, however. "Really, the company itself won't go away until the very end, all of the claims are settled or dealt with and there's nothing left to be done," Taylor says. "And that could take a long time."

The bankruptcy estate is determining if any preferential claims exist, says Roger McEowen, director of the Iowa State University's Center for Agricultural Law and Taxation. Preferential payments are made within 90 days of the bankruptcy and give preference to certain creditors over others. Under the bankruptcy code, these payments can be taken back and redistributed to creditors on a non-preferential basis, McEowen tells EPM. One defense to this, which corn producers used, is if the payments were made in the ordinary course of business.

Now the VeraSun estate is pursuing vendors and service providers. In the last 10 days of October alone, the bankruptcy estate filed more than 200 court documents, seeking to recover payments from companies that provided services or products such as chemicals, transportation, construction and even garbage services. The goal is to maximize the payment to creditors. "As a general rule, they will be very aggressive in going after any money they think they can get," Taylor says. "They will let a court decide, oftentimes, if it's a marginal issue."