Stalking Horse

GPRE bids to purchase Otter Tail Ag Enterprises.
By Holly Jessen | February 15, 2011

Green Plains Renewable Energy Inc., already the fourth largest U.S. ethanol producer, is looking to add another 55 MMgy to its production levels. The company bid $55 million—$1 million for each million gallons—for Otter Tail Ag Enterprises LLC, a still-operating bankrupt plant in Fergus Falls, Minn.
GPRE was approved by the bankruptcy court as the stalking horse bidder. A stalking horse agreement is an attempt by a debtor to test the market before an auction. The auction was set for Feb. 16 with the sale approval hearing set for Feb. 17, says Jim Stark, vice president of investor and media relations for GPRE.

Although others may bid against GPRE in the auction, as the stalking horse bidder, the company has some additional options. “If we are not the prevailing bid, we have the option to respond, if we choose to,” Stark tells EPM. The company plans to finance the transaction with a mix of cash on hand and debt financing.

Coming online in March 2008, Otter Tail Ag filed for Chapter 11 bankruptcy protection in U.S. Federal Court Oct. 30, 2009, and has been operating as a debtor in possession. It is limited from doing anything out of the ordinary course of business without approval from the court.

As part of its reorganization plan, the company attempted to raise $12 million through investors last summer. It was unable to do so by the deadline, however, even after a series of extensions. The money that was raised was returned and the courts gave Otter Tail Ag another extension. In October, the courts approved employment of Carl Marks Advisory Group LLC as financial advisor to seek additional investors, amend the plant’s proposed reorganization or locate a buyer for the plant.

If GPRE acquires the plant, it will increase its capacity by about 8 percent, from 657 MMgy to 712 MMgy. The company currently operates eight plants in Indiana, Iowa, Michigan, Nebraska and Tennessee. "We remain focused on our growth strategy of acquiring operating assets that expand our ethanol platform and contribute immediately to our financial results," said President and CEO Todd Becker. "If we are successful in the auction process, we believe our proven management capabilities will add value for all stakeholders."

GPRE also operates other complimentary businesses. It markets and distributes ethanol for four third-party ethanol producers with total capacities of 360 MMgy. It owns 51 percent of Blendstar LLC, which operates nine biofuels blending or terminal facilities in seven states. Finally, it operates grain storage, agronomy and petroleum businesses in Iowa, southern Minnesota and western Tennessee. 

—Holly Jessen